Sales and Use Tax for Real Property

In March of 2017, the North Carolina Sales and Use Tax Division published a notice on its website containing general guidance on the taxability of real property contracts and retail sales of repair, maintenance, and installation services. More recently, a second notice has been published and mass distributed by the North Carolina Department of Revenue, alluding to and simplifying the original Sales and Use Tax notice.

Both notices are informational in nature and have been distributed to retailers that the State recognizes as entities that may be affected by the recent change in Sales and Use Tax law.

Historically, North Carolina has imposed Sales and Use Tax only upon retail sales of tangible personal property and accompanying service contracts, exempting most service providers and wholesalers. Effective January 1, 2017, the imposition of Sales and Use Tax has been expanded to include repair, maintenance, and installation services sold at retail.

The notices from the Department of Revenue have been distributed to taxpayers to elucidate the definition of “repair, maintenance, and installation services” as it relates to the taxability of various transactions. The notices focus on categorizing each service provided as either: A.) a non-taxable “capital improvement”; or B.) a taxable “repair and maintenance service”. The charts provided therein are helpful tools to assist service providers with Sales and Use Tax compliance, but they are in no way comprehensive or all-inclusive.

We encourage service providers to review both notices carefully and reach out to your Smith Leonard representative with any questions regarding your Sales and Use Tax liability.

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