The cost of updating and remodeling restaurants in North Carolina, as well as repairing and maintaining property, will soon increase.
The state recently enacted changes to its sales and use tax regulations. The sales tax has now been expanded to include repairs, maintenance and installation to real property, certain capital improvements and digital property. Repairs, maintenance and installation to tangible personal property is still subject to sales tax, as it has in the past.
What does this mean for McDonald’s franchisees? In essence, any repairs, additions or alterations to your restaurant building and the land surrounding the building are now subject to North Carolina sales tax unless specifically exempt under the law. This is to be effective January 1, 2017.
The only exemptions per the new regulation performed on real property, personal and digital property are as follows:
- Cleaning of real property;
- Services on roads, driveways, parking lots and sidewalks;
- Removal of waste, trash, debris, grease, snow and other similar items;
- Landscaping services;
- Pest control; and
- Services to maintain, monitor, inspect or repair tangible personal property or digital property under a taxable service contract if there is no charge for the service performed, since it is part of a service contract
So, what do you need to do? You must get an itemized/detailed invoice for any work or service performed that may have some of the exempt items listed above so that you can be sure that only sales tax was applied to those items that are indeed taxable.
Alert: If the vendor/contractor performing the work does not collect the appropriate sales tax on the services that are subject to sales tax, it is your responsibility to pay the use tax on the taxable services.
North Carolina will be issuing additional clarification and information on this new law in the near future. We will be sure to let you know of any updates as the state releases them.
Please contact Nina M. Daigle at our office if you have any questions on these changes to North Carolina sales and use tax.
