Sales Tax On Labor

Repair, maintenance, and installation services for real property now require a sales tax on labor.
These include the following:
To keep or attempt to keep property or a motor vehicle in working order to avoid breakdown and prevent deterioration or repairs. Examples include to clean, wash, or polish property.
To calibrate, refinish, restore, or attempt to calibrate, refinish, or restore property or a motor vehicle to proper working order or good condition. This activity may include replacing or putting together what is torn or broken.

To troubleshoot, identify, or attempt to identify the source of a problem for the purpose of determining what is needed to restore property or a motor vehicle to proper working order or good condition.
d. To install, apply, connect, adjust, or set into position tangible personal property, digital property, or a motor vehicle.
e. To inspect or monitor property or a motor vehicle, but does not include security or similar monitoring services for real property.

Exemptions (Capital Improvements)
New Construction, Reconstruction or Remodeling
Removal of debris, construction materials, asbestos, or excavation activities including dumpsters
Work that requires a permit under the State Building Code (except electrical components, gas logs, water heaters, etc.)
Installation of underground utilities
Painting or wallpaper except where it is incidental to the RMI.
Replacement or installation of a roofing, septic tank, siding, plumbing, electrical, commercial refrigeration, irrigation, sprinkler or other similar system.
Replacement or installation of a heating, ventilation, and air conditioning unit or system.
Replacement or installation of roads, driveways, patios, decks, parking lots and sidewalks.
Landscaping Services
Pest control service
Moving services
A fee or charge for an inspection required by law.
Services performed to resolve an issue that was part of a real property contract if the services are performed within six months of completion of the real property contract or, for new construction, within 12 months of the new structure being occupied for the first time.
Removal of waste, trash, debris, grease, snow, and other similar items from tangible personal property, including a motor vehicle, and real property, but does not include removal of waste from portable toilets.
Home inspections related to the preparation for or the sale of real property.
Alteration and repair of clothing, except where the service constitutes a part of the gross receipts derived from the taxable rental of clothing or for alteration and repair of belts and shoes.

Labor Not Exempt

To install, apply, connect, adjust, or set into position tangible personal property, digital property, or a motor vehicle. The term includes floor refinishing and the installation of carpet, flooring, floor coverings, windows, doors, cabinets, countertops, and other installations where the item being installed may replace a similar items.
The replacement of more than one of a like-kind item, such as replacing one or more windows, is a single repair, maintenance, and installation service

For RMI, What do I do?

A retailer who:
purchases tangible personal property or repair, maintenance, and installation services for resale, shall purchase such without payment of sales or use tax and must issue Form E-595E, Streamlined Sales and Use Tax Agreement Certificate of Exemption, to the seller as the seller’s authority to exempt the tangible personal property or services from sales and use tax. The retailer is liable for and should charge sales tax to the customer on the total sales price of the repair, maintenance, and installation services.

Am I Responsible?
A person who does not collect the applicable sales or use tax on the sales price of or gross receipts derived from repair, maintenance, and installation services remains liable for the tax due unless the person maintains proper records to establish a sale is exempt from sales or use tax.

Example: A homeowner hires a handyman service to repair an area of damaged bathroom tiles. The handyman service purchases replacement tile, grout, and sealant exempt from tax by issuing Form E-595E to the retailer as these items are for resale and will be transferred to the customer’s property. The handyman is a retailer and is liable for and should collect sales tax on the total sales price of the repair, maintenance, and installation service. The handyman service must pay sales or use tax on the purchase price of any tools, such as hammers, chisels, grout spreaders, spacers, or sponges, used in making the repair.

What does this mean?
New Construction and Remodeling Projects
Exempt from new law if you provide E-589CI form to subcontractors that perform labor
Pay sales tax for tangible items at time of purchase

Repairs, Maintenance and Installation (not exempt)
Get exemption E-595E to exempt from sales and use tax when purchasing tangible items
Charge sales tax on total sales price of project to customer and remit to NC Department of Revenue

 

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