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Effective March 1, 2016, North Carolina’s general 4.75% sales and use tax rate applies to the sales price of or gross receipts from repair, maintenance, and installation services sold at retail and sourced to North Carolina. The applicable local and transit sales and use tax rates also apply to repair, maintenance, and installation services. The complementary use tax is applicable to the purchase of repair, maintenance, and installation services sourced to North Carolina.Also effective March 1, 2016, “ retailer,” is amended and defined in part, as “[a] person engaged in business of delivering, erecting, installing, or applying tangible personal property for use in this State … unless the person is one or more of the following:  1. A person that solely [emphasis added] operates as a real property contractor,  or 2. A person whose only [emphasis added] business activity is providing repair, maintenance, and installation services where the person's activities do not otherwise meet the definition of a retail trade.”   There are exemptions such as for repair, maintenance and installation services purchased for resale and for services provided on machinery and equipment which otherwise qualifies for exemptions.  Details are discussed in the Directive. (Directive No. SD-16-2, North Carolina Department of Revenue, February 5, 2016; N.C. Gen. Stat. §105-164.3(35))

(02/23/2016)

Effective January 1, 2016, North Carolina has enacted a sales and use tax exemption for sales of electricity and datacenter support equipment used at qualifying datacenters. For purposes of the exemption, “datacenter support equipment” is “property that is capitalized for tax purposes under the Code and is used for one of the following purposes:

 

  • The provision of a service or function included in the business of an owner, user, or tenant of the datacenter.
  • The generation, transformation, transmission, distribution, or management of electricity, including exterior substations, generators, transformers, unit substations, uninterruptible power supply systems, batteries, power distribution units, remote power panels, and other capital equipment for these purposes.
  • HVAC and mechanical systems, including chillers, cooling towers, air handlers, pumps, and other capital equipment used for these purposes.
  • Hardware and software for distributed and mainframe computers and servers, data storage devices, network connectivity equipment, and peripheral components and equipment.
  • To provide related computer engineering or computer science research.”

 

A “qualifying datacenter” is defined as a datacenter that satisfies each of the following conditions:

 

  • The datacenter meets the wage standard and health insurance requirements of G.S. 143B-437.08A.
  • The Secretary of Commerce has made a written determination that at least seventy-five million dollars ($75,000,000) in private funds has been or will be invested by one or more owners, users, or tenants of the datacenter within five years of the date the owner, user, or tenant of the datacenter makes its first real or tangible property investment in the datacenter on or after January 1, 2012. Investments in real or tangible property in the datacenter made prior to January 1, 2012, may not be included in the investment required by this subdivision.

 

The North Carolina Department of Revenue has issued a notice detailing what situations will result in forfeiture of the exemption. Forfeiture will result in liability for all taxes avoided as a result of the forfeited exemption including interest. The notice can be viewed here. (Important Notice: Qualifying Datacenter, North Carolina Department of Revenue, December 15, 2015)

(01/25/2016)

On December 18, 2015, President Barack Obama signed H.R. 2029 – Consolidated Appropriations Act, 2016. The Act extends the Internet Tax Freedom Act (ITFA) through October 1, 2016. Prior provisions that grandfather taxes that existed prior to October 1, 1998 are also extended through October 1, 2016. For our previous news item on this topic, see Internet Tax Freedom Act Extended Until December 11, 2015. (H.R. 2029 – Consolidated Appropriations Act, 2016)

(01/18/2016)

On September 30, 2015 the U.S. House of Representative passed H.R. 719, which includes a provision that would extend the Internet Tax Freedom Act (ITFA) through December 11, 2015. The ITFA was scheduled to expire on October 1, 2015. The bill will now go to President Obama for signature.

 

To see our previous news item on the ITFA, visit Internet Tax Freedom Act Extended Until October 1, 2015, Permanent Extension Introduced.

 

To see an update on this news item, visit Internet Tax Freedom Act Extended Through October 1, 2016,

 

(H.R. 719)

(10/26/2015)

North Carolina is changing the cutoff time for submitting electronic state tax payments to the Department of Revenue. Effective June 14, 2015, taxpayers must submit electronic payments before 5:00 p.m. in order for the payment to be drafted from a bank account on the next business day. (Release, North Carolina Department of Revenue, June 10, 2015)

(09/22/2015)

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