sponsored by BUSINESS TIP Tile installation contractors who work in North Carolina should be aware that some of their labor may now be subject to state sales tax. Previous legislative changes had only applied to installers who were also retailers, but, on Jan. 1 of this year a new state law was enacted that requires the application of sales and use tax to all “real property contracts.” The N.C. legislature has come up with its own statutory definitions of “real property,” “real property con- tract,” and “capital improvement” as well as a new tax form, E-595E. Tile contractors will most likely fall under the classification of “specialty contractor.” There have been several attempts to clarify which types of work are considered repair/ replace- ment/ reconstruction/ vs. remodel- ing, but the distinctions remain open to some interpretation. The N.C. Department of Revenue Directive issued 11/15/2016 includ- ed 15 pages of definitions and “clarifications,” and on 3/17/2017 another 12-page Notice of “Additional Information” was issued. Accountants in the state have issued differing opinions on which aspects of tile work will be taxable, and con- tractors will definitely want to get in touch with their own tax advisor. The new law is very confusing as evidenced by the continued “clari- fications.” I’ve been to quite a few seminars on how we should inter- pret the new statute, and each time the answers seem to be slightly dif- ferent. N.C. changes tax requirements on installation labor Labor may now be subject to state sales tax By Paige W. Smith, Neuse Tile Service, NTCA Region 3 Director This is an important development in tax laws that affect contractors that is taking place in North Carolina. Important in its own right, it holds even broader importance when one considers that once a single state passes this sort of law, other states will likely consider it or follow suit. Tile contractors should check with their tax accountants about any changes or revisions to laws in their own state related to sales and use tax. Forewarned is forearmed. – Ed. 30 TileLetter | May 2017