The Carolinas Associated General Contractors (CAGC) says the new sales tax on repair, maintenance and installation will likely become an election issue.
The new rules, which went into effect on March 1, impose the general 4.75 percent state rate of sales and use tax “to the sales price of or the gross receipts derived from repair, maintenance and installation services” sold at retail and sourced to the state. The applicable local (2.00% or 2.25%) and applicable transit (0.50%) rates of sales and use tax also apply to the sales price of or the gross receipts derived from such services.
CAGC says Democrats argue it hurts middle class families and small business by applying the tax to services such as auto repairs, appliance installation, clothing alterations and other services. “Republicans, however, continue to promote their overall tax policy centered on income tax cuts,” the association’s lobbyists said in a report published on the CAGC website.
The state budget approved last year will drop the personal income tax rate from 5.75 percent to 5.499 percent in 2017. Republican leaders say their tax cuts have saved the state’s taxpayers about $2.7 billion while state revenue has grown.
“Carolinas AGC has been working with the Department of Revenue and state legislative staff to better understand the implications of the tax on the construction industry. Because of the complexity of the application of the tax and its many nuances depending on the various business scenarios, CAGC cannot provide definitive advice on how this tax may affect each member’s business.”
However the NC Department of Revenue has issued several directives and established a hotline where taxpayers may seek additional information, CAGC reports. These resources can be found on NCDOR’s website http://www.dornc.com. “All members are encouraged to access this information to ensure a better understanding of the new tax implications.”
“Additionally, the legislative Revenue Laws Oversight Committee recently heard a presentation from fiscal staff on the new laws. While the presentation provided much-needed clarification, it also cited various challenges with the law and underscored how the changes are creating confusion among taxpayers. Legislators agreed that a grace period should be enacted to give taxpayers additional time to understand the law.”
The CAGC says this would likely be one of the first actions that would occur in the short session beginning April 25. The presentation is provided below.