How the New Sales and Use Tax Changes Affect Residential Construction, Particularly Regarding Repair, Maintenance and Installation Services
Effective March 1, 2016, the 4.75% general State sales tax, and the applicable local sales tax, will apply to the sales price (or the gross receipts) derived from repair, maintenance, and installation services with respect to tangible personal property. This change expands the sales tax to certain services that were previously not subject to it. In addition, effective March 1, 2016, a second change relates to the sales price of tangible personal property where the retailer makes a separate charge for labor for installation. Where the sales tax is now due on labor for installation (see below), it does not matter that the installation charge is or is not stated separately.
These changes do NOT impose the sales tax on ALL construction labor as some have claimed. Rather, the sales tax is extended to labor performed only under certain LIMITED circumstances.
NCHBA Executive Vice President and General Counsel Mike Carpenter prepared a memo to help NCHBA members understand the upcoming changes.
The memo specifically outlines:
- How the changes apply to residential construction from a builder’s perspective, including when sales tax may be due.
- How about contracts entered into prior to March 1, 2016?
- What position NCHBA took on this legislation when it was being considered?