North Carolina Makes Numerous Technical, Clarifying, and Administrative Sales and Use Tax Changes
On July 26, 2019, North Carolina Governor Roy Cooper signed legislation making various technical, clarifying, and administrative changes to sales and use tax laws. Here is a summary of the recent changes:
For the Streamlined Sales and Use Tax Agreement, the previous reference date of May 3, 2018 has been updated to December 14, 2018.
A clarification has been made to the repair, maintenance and installation services provision to provide that all repair, maintenance and installation services are taxed, regardless of whether the underlying item is subject to a different tax rate or to a maximum tax, at the general tax rate.
A previous exemption applicable to property management contracts beginning January 1, 2020 has been repealed. When repair, maintenance, and installation services provided by a real property manager under a property management contract are taxable are covered under new provisions. Additionally, if a retailer failed to collect sales tax on taxable repair, maintenance, and installation services, a grace period now exists in which the Department cannot assess any tax due for a filing period beginning on or after January 1, 2019 and ending prior to January 1, 2021. If the retailer received specific written advice from the Secretary for the transactions at issue for the laws in effect for the applicable period, the grace period does not apply.
An exemption applies to sales of diapers or prescription incontinence under-pads by an enrolled State Medicaid/Health Choice provider for use by beneficiaries of the State Medicaid program when the provider is reimbursed by the State Medicaid program or a Medicaid managed care organization. This exemption is applicable to sales occurring on or after October 1, 2019.
The requirement that certain digital items are only taxable if sold in a tangible medium has been eliminated for sales occurring on or after October 1, 2019.
The definition of “item” includes tangible personal property, certain digital property, or a service (unless otherwise required by context) and replaces the phrase “tangible personal property, digital property, and services” throughout statutory law.
Taxability of installation charges of utilities billed to a customer is clarified to apply tax to separately stated charges for repair, maintenance, and installation services or a contribution in aid of construction by telecommunications companies, video programming companies, and providers of electricity, piped natural gas, water, and sewer service.
Tax on admissions does not include charges for attendance to instructional seminars, conferences or educational workshops where entertainment activity is provided as an ancillary purpose.
Clarification has been made for procedures for a special election for a local option sales tax to provide that it cannot be held within one year from the date of the last preceding election, applicable to elections held on or after July 1, 2019.
Relief for under-collection of tax for linen rentals has been clarified such that in order to be eligible for the relief, the taxpayer must have remitted the sales tax it has collected during the period under audit.
Requirements are set forth for the Secretary to assign the lowest combined tax rate in a zip code area if more than one tax rate applies within a specific taxing area. If the Secretary cannot determine the appropriate tax rate for a street address, the Secretary must assign the lowest combined tax rate imposed within the street address’ 9-digit zip code, or if unable to determine the appropriate tax rate for a street address’ 9-digit zip code, the street address’ 5-digit zip code.
An exemption, applicable to sales made on or after October 1, 2019 to companies in the business of custom countertops, walls, or tubs, is available to sales of equipment, or repair parts for equipment that is used in cutting, shaping, polishing and finishing rough cut slabs and blocks of natural and engineered stone and stone-like products.
Applicable to sales made on or after October 1, 2019, an exemption is available to limited service vehicle washes. The exemption does not apply to any activity whereby an employee physically touches the vehicle for the purpose of cleaning or restoring the vehicle, enters or cleans any part of the interior of the vehicle, or performs an activity other than receiving payment for the transaction, guiding the vehicle into the entrance or exit of a conveyor, applying low-pressure spray of chemicals to the vehicle prior to the cleaning of the vehicle, or placing protective tape or covers on the vehicle prior to cleaning.
If you have any questions about the sales and use tax changes, contact the professional at Gilliam Bell Moser LLP