Since North Carolina’s sales & use tax on Repair, Maintenance & Installation (RMI) services took effect on January 1st, numerous questions have arisen about the implications for managers of real property, whose service agreements typically contain some services that are covered by the tax, and others that are not.
Recent meetings with General Assembly legislators and staff, as well as with senior officials from the Department of Revenue, have provided some clarification for property managers, as well as direction on how to comply with the new tax law. The following is in no way intended to be tax advice, but rather a summary of the key points gleaned from these meetings. For specific tax advice on how your business can comply with the RMI sales tax, please consult a qualified tax professional.
First, it is important to understand what types of RMI services are EXEMPT from the tax. These exemptions generally have two distinguishing characteristics, although they need not fall into either category:
- Work that constitutes a capital improvement to real property; and,
- Work that requires the issuance of a local building permit.