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North Carolina: additional installation charges now exempt


 There's a new use tax exemption in North Carolina.

On March 1, 2016, North Carolina sales and use tax was extended to numerous services, including certain installation charges. Prior to March 1, charges for many installation services were exempt when separately stated on invoices.

Broadening sales tax to many — but not all — service charges caused a certain amount of confusion for business owners and consumers alike. Adding to the uncertainty is the fact that certain installation charges are subject to reduced rates and maximum tax caps, while others are fully taxable and still others are exempt.

Hold on to your wrenches, because tax compliance in North Carolina is about to get even more complicated. Recently enacted legislation (effective retroactively on July 1, 2016) creates a use tax exemption for “installation charges that are part of the sales price of tangible personal property or digital property purchased by the permit holder for a boat, an aircraft, or a qualified jet engine, provided the installation charges are separately stated and identified as such on the invoice or other documentation given to the permit holder at the time of sale.”

Also newly exempt from use tax (permit holders only): charges for “repair, maintenance, and installation services provided for a boat, an aircraft, or a qualified jet engine.”

According to the North Carolina Department of Revenue (DORNC):

“The allowable amount of the use tax exemption is the amount of the installation charges that are part of the sales price of tangible personal property or digital property that exceed … $25,000 and the sales price of or gross receipts derived from the repair, maintenance, and installation services that exceed … $25,000.”

For additional information, please see this DORNC important notice.

If it seems complicated, it’s because it is. To simplify sales and use tax compliance in North Carolina and other states, implement sales tax software-as-a-service. Learn how it works.

photo credit: BRITISH COLUMBIA 1971 MUNICIPAL EXEMPT plate via photopin (license)


Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.