North Carolina, Real Property Contracts and Sales Tax, January 2015
- Jan 27, 2015 | Gail Cole
The state of North Carolina Department of Revenue, retailers must adopt the new application of sales and use tax to all applicable transactions on or after January 1, 2015.
Real property contractors are considered the consumer of tangible personal property that they install/apply for others and that becomes part of real property. As a result, real property contractors must pay sales tax at the time of purchase.
However, a retailer contractor acting as a real property contractor may purchase exempt from sales tax “tangible personal property to be installed or affixed to real property,” provided the following two conditions are met:
- The buyer provides the seller with a property completed “certificate of exemption pursuant to G.S. 105-164.28.”
- The buyer (the retailer-contractor) also “purchases inventory items from the seller for resale.”
The buyer must pay use tax when “tangible personal property purchased for resale without payment of tax is withdrawn from inventory by a retailer-contractor and installed or affixed to tangible personal property.” The same is true when tangible personal property is withdrawn from inventory for use but does not become part of real property.
Separately stated tax is erroneous
Sales or use tax should not be separately stated on invoices or other documentation provided to the consumer by a real property contractor. If tax is separately stated and paid, it is “an erroneous collection and must be remitted to the Secretary….”
A real property contractor is defined under North Carolina law as “a person that contracts to perform construction, reconstruction, installation, repair, or any other service with respect to real property and to furnish tangible personal property to be installed or applied to real property in connection with the contract and the labor to install or apply the tangible personal property that becomes part of real property. The term includes a general contractor, a subcontractor, or a builder for purposes of N.C. Gen. Stat. §105-164.4H.”
A retailer-contractor is “a person that acts as a retailer when it sells tangible personal property at retail and as a real property contractor when it performs real property contracts.”
Additional information is available on the North Carolina Department of Revenue Important Notice: Real Property Contracts.
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