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Sales Tax Changes for 2016 - Carland & Andersen, Inc. - Certified Public Accountants

Dear Business Owner: Big changes are coming in 2016 in the area of Sales & Use Tax in the state of North Carolina for which we wanted to be sure you were aware. In the past, repairs and maintenance revenue was generally exempt from North Carolina sales tax. However, effective March 1, 2016, sales tax will now be collected and remitted to the state on certain repairs and maintenance services.

Repair, maintenance, and installation services performed to “keep tangible personal property or a motor vehicle in working order and avoid breakdown and prevent repairs” are now subject to sales tax. This applies to automotive repairs and maintenance, jewelry repairs, just to name a few.Additionally, installation charges assessed by retailers, which were previously exempt from sales tax when separately stated on the invoice, are now subject to sales tax.

Real Property Contractors are also affected by this tax directive, as “they are now liable for payment of sales and use tax on taxable repair, maintenance, and installation services purchased to fulfill a real property contract”. The Department defines a “Real Property Contractor” as a person not engaged in retail trade. The Department has been very vague in this area of exactly what changes are taking place for contractors, but they do say they will be releasing more information in the future.  There are some exceptions, such as auto work performed in conjunction with a dealer or manufacturer’s warranty. Also exempt are repair, maintenance, and installation services provided for an item, other than a motor vehicle, under a service contract.

Additional information regarding the application of the sales and use tax statues to repair, maintenance, and installation services will be issued by the Department prior to March 1, 2016. To review the current overview of the legislative changes, please visit http://www.dor.state.nc.us/downloads/e505_10-15.pdf. Our staff will certainly be available if you have any further questions or tax needs.