Are Repair Services Taxable in North Carolina

$0.7 million from the one-time costs of repairing CAC outside of NC [2] Real estate contractors provide tangible property to be incorporated into real property and associated work to install or apply that tangible property in real property. These businesses typically pay sales or use tax on taxable real estate they purchase for use in their contracts and do not charge sales tax on their invoices to customers for such contracts. See NC Gen. Stat. §105-164.4H. Exception: A person whose sole business activity is to provide RMI services and who does not meet the definition of ”retail” is not a retailer and is not subject to sales or use tax on his or her gross revenues from RMI services. The second criterion is whether the services provided meet the definition of ”repair, maintenance and installation”. Nc General Statutes defines RMI and states that it includes the following activities. Example: A person who deals exclusively with the installation and repair of septic tanks in the ground is a real estate contractor. The Sales and Use Tax Directive CD-16-1 defines RMI services: This means that companies that enter into real estate contracts, but also sell and provide services for tangible items called retailer-contractors, must begin collecting sales tax on their real estate contracts if a large portion of their revenue comes from North Carolina from retail trade. [3] For example, if a flooring contractor generates $70,000 in annual revenue from the retail sale of carpets that they do not install, as well as $30,000 in annual revenue from real estate contracts under which they supply and install carpets to customers, that contractor is primarily engaged in retail trade and must collect sales tax on their retail and contract sales. RMI services purchased for resale. Example: A body shop purchases tire alignment and balancing services from a tire dealer to repair a customer`s destroyed car.

This is an RMI service exempt for resale. Exceptions: Here are some transactions that are not considered RMI services: A tax-exempt item for farmers at 105-164.13 or 105-164.13E. For example, VAT should not be levied on repair work on a tractor used by an eligible farmer for use on farms. maintenance or repair services for tangible property or motor vehicle in accordance with a taxable service contract, if the purchaser of the contract is not charged for the goods. The North Carolina Department of Revenue provides the following examples of taxable transactions: Exception: A person acting as a real estate contractor is not a retailer of RMI services and is not responsible for sales tax on those RMI services. A company that operates only as a real estate entrepreneur is not subject to VAT on its RMI services. A real estate entrepreneur who installs tangible property on immovable property, but who does not also sell taxable personal property in the retail trade, is not a ”retailer” and is therefore not required to charge VAT on his RMI services. However, if the real estate entrepreneur sells a contract for the maintenance of the equipment, this contract is subject to the NC VAT levied by the customer. The selling price or gross receipts from repair, maintenance and installation services sold in the retail trade are subject to the general state tax and the applicable local and transit tax of the sales and use tax. Repair, maintenance and installation services are available in N.C. Gen.

Stat. § 105-164.3 and are defined in accordance with the in N.C Gen. Stat. § 105 to 164.4B Only the commercial activity provides RMI services if the commercial activities do not meet the definition of retail trade. 2) If this is the case, you must identify the ”repair, maintenance and installation services” that are sold in retail stores and are therefore subject to VAT. [1] See NC Gen. Stat. §105-164.3(35b). Businesses that only provide repair, maintenance and installation services and never sell tangible assets are excluded from the definition of retail, which means they likely won`t have to start collecting sales tax. Example: The garage buys and installs an engine in a customer`s car. The engine and the work to be installed are taxable.

An RMI ”item” or service under a tangible personal property service contract if the buyer of the contract is not charged for the RMI ”item” or services. The term ”object” does not include a tool, equipment, supply or similar personal material good used to perform maintenance or repair and that is not considered a component or part of repair of the physical personal property for which the service contract was sold. For example, a copier sells a service contract written by a debtor to his retail customer on which VAT was correctly collected at the time of sale. The customer calls the debtor for the service. The debtor concludes contracts with the retailer for the provision of the service. The retailer does not employ repairers, but rather hires a third-party repair company. The sale of an RMI item or service to the copier or debtor is not subject to sales or use tax if appropriate exemption documentation is provided. Viii. The seller must obtain the Form E-595E Exemption Certificate (and the buyer must provide it) to properly document that qualified RMI services are exempt from sales and use tax. Form E-595AE is the seller`s authority to compensate the sale. Alternatively, the data elements may be made available to the Seller as required in NC G.S. 105-164.28 (a).

A person who does not collect the appropriate sales or use tax and who does not properly document an exemption remains responsible for the sales and use tax. Real estate services (for land, buildings or other structures) are subject to VAT if the turnover of the products exceeds 50% of the turnover. Note: Most entrepreneurs do not have a retail sale to the public and are therefore not subject to the tax. The expression ”installation costs” is part of the definition of ”selling price” within the meaning of N.C. Gen. Stat. § 105-164.3. The cost of installing a retailer to a buyer in connection with the retail sale of physical personal property, certain digital goods and taxable services is subject to the applicable rate of sales and use tax of the item according to N.C.

Gen. Stat. § 105-164.4(a), whether or not the installation fee can be specified separately by the dealer. The following RMI services are exempt from VAT: Services purchased for resale. Example: A body shop sends a car to a dealer for mechanical repair, the dealer does not collect taxes with the submission of Form E-595E (below) The sales tax on RMI services must be calculated and transferred based on the country in which the customer will use the property. Typically, this is where the property is located or where the tangible or digital property is returned to the buyer. This means that plumbers, HVAC technicians, electricians, and craftsmen must assess, report, and transfer property taxes based on the county where the home repair services were provided. .