NCHBA Generated Residential Construction Sales Tax Changes Effective 01/01/17

 
Important tax changes regarding sales and use tax applicable to residential construction take effect January 1, 2017.
These changes affect when sales or use tax is due on labor in connection with construction activities. Recently, the NC Department of Revenue (DOR) mailed notices to persons that hold an electrical contractor license, generating questions to NCHBA about these changes. We anticipate that DOR may send additional notices to other trades.
In order to minimize confusion, NCHBA has prepared a summary explanation of these changes, which you can download by clicking this link. This document is our brief description of the changes and the sales tax fix that NCHBA helped bring about in HB 1030 (2016 Appropriations Act) during the most recent session of the General Assembly.
In short, labor charges for new construction and most remodeling activities are not subject to sales tax on labor because they will meet the definition of “capital improvement” pursuant to a “real property contract”.
Our summary also contains links to directives issued on 11/15/16 by the Department of Revenue about these changes.
Finally, the Department of Revenue has opined that an affidavit must be provided to substantiate that the work is a capital improvement. This Form E-589C1 has not yet been made available by DOR but is promised soon. Please see our document for further explanation of this requirement.
FOR MORE INFORMATION: Contact Mike Carpenter, mcarpenter@nchba.org, or Tim Minton, tminton@nchba.org, or call NCHBA at (800) 662-7129.
Sincerely,
Mike Carpenter
NCHBA General Counsel
 
 
 
      

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