Does the new NC sales tax on services apply to contractors and sub-trades? It depends . . .

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plumber at work

North Carolina’s new sales tax on services has created interpretation headaches for businesses providing repair, maintenance and installation services for homes and non-residential buildings.

The issue, according to the Raleigh News & Observer, relates to the fact that the requirement to levy the tax depends largely on whether the firm performing the service is also selling materials, and therefore collecting sales tax.

“Thus far, it’s been a bit difficult to truly understand it,” said Jim Pendergrass, executive director of the Plumbing-Heating-Cooling Contractors Association of North Carolina (PHCCNC). “There seems to be a lot of exemptions and a lack of clarifications.”

The rules are that sales tax requirements will depend on whether  the majority of a business’ sales come from parts or equipment. Effectively, a service such as unclogging a toilet would be subject to sales tax with a company whose business is mostly sales but exempt if a customer hires someone whose business is just to provide the service.

“The law doesn’t pick up on the fact that it could create an unlevel playing field,” Pendergrass told the News & Observer.

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