On July 23, 2013, North Carolina Governor Pat McCrory signed into law House Bill 998, the Tax Simplification and Reduction Act (the Act). This legislation made important changes to the North Carolina tax code and included reforms to the state’s individual income tax, corporate income tax, and sales and use tax. Among numerous significant changes, the Act extends the application of the North Carolina sales tax to sales of service contracts beginning on January 1, 2014.

  • Taxable Service Contract Defined
  • Single Repair Transactions Not Covered by a Service Contract are Exempt
  • Contracts to Maintain, Service, or Repair Real Property or Personal Property Attached to Real Property
  • Sales Tax Applicable to Receipts for Certain Service Contracts Entered Into Prior to January 1, 2014
  • Separately State Sales Tax on Invoice
  • Cancellation or Refund of a Service Contract

For more information, including exceptions to the new law and a list of exemptions, here is a link to the North Carolina Department of Revenue’s Directive.

If you would like more details about the new law and how it might impact you, please do not hesitate to call our office at 910.323.3100.

This document contains general information, may be based on authorities that are subject to change, and is not a substitute for professional advice or services.  This document does not constitute assurance, tax, consulting, business, financial, investment, legal or other professional advice, and you should consult a qualified professional advisor before taking any action based on the information herein. McFadyen & Sumner, CPAs PA is not responsible for any loss resulting from or relating to reliance on this document by any person.