This Tax Affects…

NC Sales & Use Tax ExpansionsIf you’re a small business owner in North Carolina, you’re probably aware that new laws expanding the State sales tax took effect in March of 2016. Here’s a breakdown of some of the types of businesses that are affected by this expansion:

· Vehicle Repair
· Shoe Repair
· Watch, Clock, and Jewelry Repair
· Installation of Modular Homes
· Sign Makers
· Dry Cleaning
· Installation of Tombstones and Gravestone Markers
· Reupholstering
· Cabinet Installation
· Clothing Repair or Alteration, and
· more

If you provide any of the above services in your business, you’re going to want to understand what this means for you, and the best way to do so is by calling the North Carolina Department of Revenue, and your business accountant.

The bottom line is that businesses will be responsible for additional sales and use tax, which means increased costs for customers. How much and for what services is dependent on the business itself, but the consensus thus far seems to be that these costs will have to be passed to the customer, in order to allow businesses to try and stay afloat.

This is because the tax itself is not the only cost that businesses are worried about with the new changes. Accountants will have to be more involved now, both with helping clients understand the new laws, and with making sure businesses are compliant with the new tax expansions. Businesses may also lose certain regular customers if the bottom line increase is too much to tolerate.

Does the Tax Apply To All Businesses?

For those not familiar, this taxability change became effective March 1, 2016 and applies to retailers. This exempts certain professionals by definition, including real property contractors (who operate solely as real property contractors), and those whose only business activity is providing repair, maintenance, and installation services where the persons activities do not otherwise meet the definition of a retail trade. Sound confusing? It is.

I won’t bore you with the long and more-confusing definition of “retailer” under North Carolina’s sales and use tax statutes, but basically, if you sell something, even as a consignor or distributor, you could be considered a retailer for tax purposes. Again, you should consult with the Department of Revenue and your accountant if you don’t know whether these new taxes apply to you and your business.

For more information, please feel free to contact us at eric@lawplusplus.com or call (919) 627-8602.

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