North Carolina Law Overhauls Occupancy Tax for Nash County, Creates New Rocky Mount Taxing District

RALEIGH, N.C. — A new law enacted in North Carolina on July 2, 2026, significantly alters the room occupancy tax structure for businesses in Nash County and the city of Rocky Mount. The legislation, signed into law as Session Law 2026-35 after passing as House Bill 332, repeals a portion of Nash County's existing tax authority and establishes a new, independent taxing district for the portion of Rocky Mount located within the county, granting it the power to levy its own occupancy tax.

The changes, which take effect October 1, 2026, directly impact hotels, motels, inns, and other short-term accommodation providers. The law aims to give the City of Rocky Mount more direct control over tourism-related revenue, a power it had sought for years to better leverage its significant investments in local tourism infrastructure.

While this legislation is specific to one region, it highlights a common challenge for businesses operating across multiple jurisdictions: the constant evolution of local tax laws. In our experience, these changes are rarely as simple as adjusting a rate in a software program. The creation of a new taxing authority, like the Rocky Mount District R, introduces new compliance obligations, separate registration and filing requirements, and different remittance procedures. For a hotel operator, this means tracking and segregating revenue streams and tax liabilities with greater precision. Misinterpreting these new rules can lead to penalties and costly audits. This is precisely the kind of intricate local tax issue where specialized guidance is essential. C&S Finance Group LLC helps businesses navigate these complexities through our tax preparation and compliance services, ensuring they remain compliant as jurisdictional lines and rates shift. Business owners facing similar changes can contact C&S Finance Group LLC at csfinancegroup.com to understand their new obligations.

Under the previous structure, Nash County was authorized to levy a room occupancy tax of up to 5%, which included a 2% tax whose proceeds were designated for tourism promotion within the City of Rocky Mount. However, the city had to seek approval from the Nash County Tourism Development Authority (TDA) to spend these funds. According to a memo from Rocky Mount's city manager's office, this arrangement was seen as an impediment, given the city's investment of over $100 million in tourism assets like the Rocky Mount Event Center and the Rocky Mount Sports Complex. The new law is the culmination of efforts to give the city direct control over its tourism tax revenue.

The enacted legislation achieves this by making two fundamental changes. First, it repeals Nash County’s authority to levy the additional 2% tax on behalf of Rocky Mount, effectively reducing the county’s maximum authorized occupancy tax rate to 3% for accommodations outside the new district.

Second, the law creates the “Rocky Mount District R,” a new special taxing district encompassing the part of the city within Nash County’s borders. The Rocky Mount City Council will serve as the district's governing body. This new entity is authorized to levy its own room occupancy tax of up to 2% on gross receipts from the rental of accommodations within its boundaries. This tax is in addition to any state or local sales taxes.

The legislation also provides a clear transition plan for funds collected under the old system. Nash County is now required to remit any net proceeds from the now-repealed 2% tax that have been collected but not yet sent to the city. These funds, along with any unexpended proceeds held by the City of Rocky Mount as of October 1, 2026, will be transferred to the newly created Rocky Mount District R Tourism Development Authority.

For small and mid-sized hospitality businesses in the region, the operational impact is immediate. Operators within Nash County but outside the new Rocky Mount district will see their total occupancy tax remittance to the county decrease. Conversely, businesses inside Rocky Mount District R will now have to administer two separate occupancy taxes: the 3% Nash County tax and the new 2% District R tax. This will require updates to booking and accounting systems to ensure accurate collection from guests and proper remittance to two different government bodies.

The law specifies that the new district tax must be levied, administered, and collected according to uniform state provisions, providing a standardized framework for businesses to follow. The revenue generated by the new 2% tax is to be used by the Rocky Mount District R Tourism Development Authority for tourism promotion.

Looking ahead, hospitality businesses in the affected area must prepare their financial systems for the October 1 effective date. They should also anticipate guidance from the new Rocky Mount District R governing body regarding registration, filing deadlines, and remittance procedures for the new tax. The smooth transfer of existing funds will also be a key step in empowering the new authority to begin its work promoting tourism in the city.