SALES TAX ON REPAIR, MAINTENANCE AND INSTALLATION IN RESIDENTIAL CONSTRUCTION

SPECIFIC EXAMPLES: Among the specific examples of a “capital improvement” is “performance of work that requires the issuance of a permit under the State Building Code” (a residential project that costs $15,000 or more). Other examples include painting, wallpapering and landscape services. Specifically excluded from taxation are services performed to resolve an issue that was part of a real property contract within twelve months of the new structure being occupied for the first time (warranty callbacks). Home inspections, debris removal, pest control and fees for inspections required by law are also specifically exempt. Those subcontractors who operate as a “retailer-contractor” (i.e., provide subcontractor services to builders and others) are also exempt when the entity acts as a real property contractor.

TAX ON RMI LABOR DUE WHEN NOT A CAPITAL IMPROVEMENT: A single repair, maintenance or installation service does not qualify as a capital improvement. The replacement of a fixture in or on a building or structure is not a capital improvement unless the replacement is a part of remodeling. Some remodeling projects may include activities which qualify as a capital improvement (no tax on labor) and activities that constitute a repair (tax on labor). However, no tax will be due on labor in these “mixed transactions” if the price of the repair, maintenance or installation (RMI) service does not exceed ten percent (10%) of the contract price. If it exceeds 10% of the contract price, then sales and use tax applies only to the RMI labor portion of the contract.

GENERAL CONTRACTOR MUST PROVIDE AFFIDAVIT TO SUBCONTRACTOR (Form E-589CI): The NC Department of Revenue (DOR) has opined that this affidavit generally must be provided to substantiate that the work is a capital improvement. This Form E-589CI was just made available on the DOR website on 12/09/16 along with the following explanation: The N.C. Department of Revenue has published the Form E-589CI, Affidavit of Capital Improvement, and a corresponding notice. The Form E-589CI is generally required to substantiate that a contract, or a portion of work to be performed to fulfill a contract, is to be taxed for sales and use tax purposes as a real property contract with respect to a capital improvement to real property. Failure of a person to issue Form E-589CI, other than for the permitted exceptions discussed within this Important Notice, to substantiate that a transaction is for a real property contract with respect to a capital improvement subjects the transaction to tax as a retail sale of repair, maintenance, and installation services for real property in accordance with N.C. Gen. Stat. § 105-164.4(a)(16). The instructions (printed on the reverse of the form) summarize the following exceptions to DOR’s requirement to issue Form E-589CI: The following are exceptions for transactions where Form E-589CI is not required to be issued to substantiate that the transaction is taxed, as applicable, for sales and use tax purposes as a real property contract with respect to a capital improvement to real property. • Painting or wallpapering real property, or parts thereof. • Landscaping service. Form E-589CI is not required to be issued by the specific person for a transaction noted below. The exceptions do not apply to transactions between a general contractor hired to oversee the entire contract and one of its subcontractors (See “Blanket Use” of Form E-589CI (Section II) for possible exceptions.). The following exceptions do not apply to remodeling. • A real property owner or other person hires a general contractor to oversee the entire contract and the contract is for “new construction” as defined in N.C. Gen. Stat. § 105- 164.4H(e)(2). • A real property owner or other person hires a general contractor to oversee the entire contract and the contract is to rebuild or construct again a prior existing permanent building, structure, or fixture on land (reconstruction as defined in N.C. Gen. Stat. § 105- 164.4H(e)(3)). • A general contractor that purchases all tangible personal property and digital property to fulfill the real property contract and provides the employee labor to fulfill the real property contract. With respect to the form itself, the Section 1 is for “single use” (where there is no recurring business relationship between the contractor and the subcontractor) and Section II is for ‘blanket use” (where there is a recurring business relationship). Experience would suggest that most residential general contractors (whether new construction or remodeling) will be able to utilize the “blanket” version as builders typically utilize the same subcontractors on a recurring basis. [NCHBA questioned DOR why this affidavit needed to be furnished with respect to new construction as it is, by definition, a capital improvement. This issue will likely be further addressed in the upcoming session.]

DOR DIRECTIVES: On 11/15/16, the NC Department of Revenue issued two directives relative to these changes. The first, SD-16-3, addresses the application of sales and use taxes to a real property contract with respect to a capital improvement for real property. The second, SD-16-4, addresses a number of issues relative to the application of sales and use tax concerning repair, maintenance and installation (RMI). Please consult these directives for more discussion and examples.

FOR MORE INFORMATION: Contact Mike Carpenter, mcarpenter@nchba.org, or Tim Minton, tminton@nchba.org, or call NCHBA at (800) 662-7129. 

Remodelers Council

Leadership Report
View More: http://jeremy-skyler.pass.us/20160429Robbie Jester, Remodeler’s President

Remodelers Christmas Social
December 13, 6 – 8:30pm
Five Points – Event Room

 

hbaws_dobizwithmembers (2)

Robert Jester, Branch Manager
Ferguson – a Wolseley Company
7905 North Point Blvd.  Winston-Salem · NC · 27106
T: +1 (336) 759 0253 · F: +1 (336) 759 0857 C: +1 (336) 345 3025
E: robert.jester@ferguson.com
www.ferguson.com

Housing = Jobs

Housing = Jobs

Housing = Jobs

[NCHBA] Consumer Benefits of New Construction:

  • Even though new homes tend to be larger, energy costs are about 10 percent lower in new homes compared to existing homes.
  • Maintenance costs on average were 56 percent lower in new homes; $547 a year for all single family homes versus $241 for homes built after 2008.
  • New homes feature floor plans that suit modern lifestyles, with open space layouts, high ceilings, large windows and design features such as information centers in kitchens, laundry rooms located near bedrooms, walk-in closets and pantries and mudrooms for convenience and comfort. Find the most popular features in 2014
  • Today’s new homes are built with environmentally-friendly features such as energy-efficient tankless water heaters, Energy Star appliances, HVAC systems, insulation and windows and doors that make the home more comfortable and can save the home owners money over the long term.

Community and Economic Benefits of New Construction:

The estimated one-year local impacts of building 100 single-family homes in a typical metro area include:

  • $21.1 million in local income,
  • $2.2 million in taxes and other revenue for local governments, and
  • 324 local jobs.

The additional, annually recurring impacts of building 100 single-family homes in a typical metro area include:

  • $3.1 million in local income,
  • $743,000 in taxes and other revenue for local governments, and
  • 53 local jobs.

HOUSING = JOBS

*Article originally posted on NCHBA website.

Building, Buying, Remodeling: Resources

Building, Buying, Remodeling: Resources

Building, Buying, Remodeling: Resources

[NAHB] Everything you need to know about buying, financing, building, maintaining or remodeling your home is right here. This section guides you through every stage of homeownership and helps you understand more about home building and the environmental and community growth issues facing our neighborhoods. Whether you’re a current or prospective home owner, or just interested in home building — there’s something for everyone.

  • Buying or Building Your Home  (19 items)
    Learn about home buying and building a new home with resources and advice to help you become a more educated consumer.
  • Financing Your Home   (7 items)
    Learn about home financing basics from getting a mortgage to settlement and closing.
  • Floor Plans  (go to item)
    Stay abreast of design trends and learn what’s new in today’s market from floor plans to the finished product.
  • Green Building & Energy Efficiency   (9 items)
    Learn about cost-effective, sustainable building and remodeling, and find a Certified Green Professional to help you create your green dream home.
  • Home Maintenance  (26 items)
    Learn about routine maintenance, energy efficiency, safety and more in order to protect your investment and properly care for your home.

Originally posted on NAHB Website: http://www.nahb.org/page.aspx/category/sectionID=112

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