Client Alert: Expansion of Sales Tax in North Carolina Requires Reexamination of Service Contracts

In March of 2016, the General Assembly expanded the North Carolina sales and use tax to make the provision of certain repair, maintenance and installation (RMI) services taxable. However, significant confusion resulted as not all providers were subject to the new requirement. In response to the confusion, and effective January 1, the requirement will be further expanded. If you provide any RMI services, you will need to examine the services you provide in order to determine if you need to assess sales and use taxes in the New Year. 

Three main changes will take effect on January 1, 2017. First, the definition of a “retailer” has been expanded to include nearly all RMI service providers. Second, the tax has been expanded from tangible personal property to RMI services on digital property (see discussion below). Third, the taxes now are imposed on RMI services related to real property.    Click here to read full article.

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