Labor Tax

GotWood

GotWood

Sayer of Fact
Joined
Jan 12, 2007
Location
Maiden, NC
As many of us are business owners, who has been working in your new tax. I lost a job today because I explained I was now required to collect tax on my labor. The bad thing is my accountant doesn't completely understand and neither does Raleigh from the phone calls I've made.
 
I heard about this on the news. Sounds nuts to me.
 
I have been searching this all morning. I can't find much other than if your business is selling the parts & installing them then you have to pay. If you are just providing the repair but not selling then you do not have to pay. I believe there is a sales percentage but can't find it.

Sound correct?
 
One thing I read was a PDF from the state giving examples. In it, it seemed that if you touch anything taxable, then your labor is taxable, whether or not you provided that item.
 
kaiser715 said:
One thing I read was a PDF from the state giving examples. In it, it seemed that if you touch anything taxable, then your labor is taxable, whether or not you provided that item.
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Do you still have that PDF?
 
I thought the way I read it, if you do any labor at all it is taxed at 4.5%?

Or maybe I'm wrong. Fuck, I don't know. I don't know if anyone knows. I don't do installs right now so I'm not overly concerned at the moment, but when I go full time and start doing repairs and installs I hope it all gets figured out.
 
BIGWOODY said:
My shop is in Greensboro , accountant told me 6.75% same as parts sales.
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SO a guy comes in to get his car fixed and he has tax on parts and tax on the labor too?
 
I don't buy the parts nor do I sell them. I install them and it's not automotive, it's heavy equipment. I am only labor.
 
GotWood said:
As many of us are business owners, who has been working in your new tax. I lost a job today because I explained I was now required to collect tax on my labor. The bad thing is my accountant doesn't completely understand and neither does Raleigh from the phone calls I've made.
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Seriously, someone was upset over +/- 7% tax charged on your labor?

I love it when people think that because someone charges you tax, it's somehow "for them". You have to charge the tax because YOU have to PAY the tax.
 
Even if you don't sell parts you still have to charge the labor tax as of yesterday (March 1 2016). All labor being done at the retail/consumer level. So if you are being subbed out by another company that is selling the labor to the end customer than they collect the tax, just like parts resale. There is essentially no way around it unless doing off the books. It is the full state and county tax rate that you would charge on parts.

I got a letter Monday from the state that gives explanations and examples of how it is all supposed to work. It is still somewhat difficult to follow, but I know for me I have to charge the same tax on all parts and all labor. It will basically apply to any labor/service/repair: plumbing, electrical, automotive... they specify guidelines for shoe repair... everything

I'm sure I will hear a lot of crap from a lot of customers for a while until everyone is accustomed to it. That's almost another $5k on a $70K + restoration/build.
 
Applicability A retailer engaged in business in the State is liable for the sales or use tax on the sales price of or the gross receipts derived from repair, maintenance, and installation services sold at retail and sourced to the State. Example: A person engaged in business in the State of selling appliances at retail is a retailer. Any charges by such person on or after March 1, 2016 for a service call for troubleshooting only is a charge for repair, maintenance, and installation services and is subject to tax. North Carolina Department of Revenue Sales and Use Tax Division Page 3 of 8 SD-16-2 A person whose only business activity is providing repair, maintenance, and installation services, where the person’s activities do not otherwise meet the definition of “retail trade,” is not a retailer and is not liable for sales or use tax on the sales price of or gross receipts derived from repair, maintenance, and installations services on or after March 1, 2016. Example: A person who only receives gross receipts from sharpening knives owned by customers and does not make other retail sales is not a retailer for sales and use tax purposes and is not liable for tax on receipts from sharpening knives on or after March 1, 2016, no matter that such charge meets the definition of “repair, maintenance, and installation services.”
 
So you just quit offering the retail of goods / materials to the client???

Seems this would just split the business in half with a retail business and then a maintenance/ repair and installation business completely separate from each other??? Basically different owner and/or LLC's and addresses?

Then I would't see the difference in sharpening knives with anything else that don't sell goods/materials to the public???
 
6BangBronk said:
So you just quit offering the retail of goods / materials to the client???

Seems this would just split the business in half with a retail business and then a maintenance/ repair and installation business completely separate from each other??? Basically different owner and/or LLC's and addresses?

Then I would't see the difference in sharpening knives with anything else that don't sell goods/materials to the public???
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The way I read this, in specifically my case. This tax does not affect me. I only install and repair. I never sell parts.

Now for the rest of the folks like @GotWood. I think that until this new tax is going to hurt business until the customers realize it's real.
 
ghost said:
SO a guy comes in to get his car fixed and he has tax on parts and tax on the labor too?
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Yep, but your personal tax rates are lower so you should be happy!
Jeff B said:
The way I read this, in specifically my case. This tax does not affect me. I only install and repair. I never sell parts.

Now for the rest of the folks like @GotWood. I think that until this new tax is going to hurt business until the customers realize it's real.
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From what I understood from what the state sent me, is that if you charge a customer labor, you have to collect tax. The only way you don't have to pay tax is if I sell a customer a part, charge them a labor fee that I pay the tax on, and then hire you to install the part and pay you a set rate. They are still getting their labor tax, just from me instead of you.

Someone is going to pay that tax regardless.
 
NC-V said:
Yes personal taxes are lower, but one good sized repair/installation etc will blow the little bit of savings in income tax out of the water.

What are most people going to save per year... $50-100?
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My post was sarcastic. :lol:

This is going to definitely cost more for everyone involved. People who pay the tax are going to hate it, businesses who have to charge and keep up with the tax are going to hate it, the only one happy about it is the government because they are making more than they were before they did this whole shift. Really, this is just a tax on small businesses. Seems like it to me at least.
 
Blaze said:
Yep, but your personal tax rates are lower so you should be happy!


From what I understood from what the state sent me, is that if you charge a customer labor, you have to collect tax. The only way you don't have to pay tax is if I sell a customer a part, charge them a labor fee that I pay the tax on, and then hire you to install the part and pay you a set rate. They are still getting their labor tax, just from me instead of you.

Someone is going to pay that tax regardless.
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Do you have what they sent you that you can post it? I would like to read it. What I posted I took front he NC state revenue site.
 
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