Dealership Flash

North Carolina State and Local Sales and Use Tax on Motor Vehicle Repairs, Maintenance, and Installation Services

March 10, 2016


Effective March 1, 2016, the state of North Carolina will impose state and local sales and use tax on repair, maintenance, and installation services (RMI) for motor vehicles. Until March 1, 2016, charges for RMI services that were stated separately on an invoice or similar billing document that was given to the purchaser at the time of sale were exempt.

North Carolina General Assembly Statute Section 105-164.3(33d) provides the terms “repair, maintenance, and installation services” and includes charges for the following activities:

  • Keeping or attempting to keep tangible personal property or a motor vehicle in working order to avoid breakdown and prevent repairs.
  • Calibrating, restoring, or attempting to calibrate or restore tangible personal property or a motor vehicle to proper working order or good condition. This activity may include replacing or putting together what is torn or broken.
  • Troubleshooting, identifying, or attempting to identify the source of a problem for the purpose of determining what is needed to restore tangible personal property or a motor vehicle to proper working order or good condition.
  • Installing or applying tangible personal property except tangible personal property installed or applied by a real property contractor pursuant to a real property contract.

Under the new statute:

  • All RMI services performed on motor vehicles are subject to state and local sales and use tax even though motor vehicle sales are subject to the highway use tax.
  • Service contracts on motor vehicles are exempt from the state and local sales and use tax beginning March 1, 2016.
  • Service contracts on motor vehicles remain exempt from the highway use tax as long as the charge for the service contract is stated separately on the bill of sale or similar documentation.
  • Services as well as repair and replacement parts provided pursuant to a dealer or manufacturer’s warranty are exempt. This provision applies specifically to motor vehicle warranties as well as warranties on other types of tangible personal property.

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Daniel E. Megathlin

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