Posted 6:15 p.m. today
Updated 6:45 p.m. today
Raleigh, N. C. \u2014 An effort revamp North Carolina’s sales tax system to include many services and not just product purchases has created a patchwork of rules and exceptions that is already causing confusion among homeowners and contractors.
The Repair, Maintenance and Installation Service Tax for Real Property went into effect Jan. 1, meaning that contractors must collect an extra 6.75 to 7.5 percent for sales tax, depending on location, for labor costs on repairs to a home, from siding and roof fixes to plumbing and electrical work.
As with most things, however, the devil is in the details:
The state Department of Revenue has issued an even longer list of what qualifies as a repair and is subject to a new service tax, as well as rules regarding real property contracts for services and capital improvements .
\u00ab\u00a0Anytime you deal with tax law it can be confusing,\u00a0\u00bb said Andy Ellen, president of the North Carolina Retail Merchants Association. \u00ab\u00a0I think the General Assembly was trying to simplify it. \u00a0\u00bb
State lawmakers wrote the law so major remodeling projects that require a building permit are omitted from the service tax.
\u00ab\u00a0If you capitalize an item as a business may do and you capitalize it for income tax purposes, it’s exempt as a capital improvement,\u00a0\u00bb Ellen said. \u00ab\u00a0They were trying to make sure that any changes they made did not disincentivize capital investment so that people would continue to do store remodels and build new homes and do those things that create new jobs and grow the economy. \u00a0\u00bb
The Revenue Department has been working to educate contractors, who’ve never had to register with the state and charge sales tax for labor.<\/p>\n

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