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Construction Grandfathered Concerning Tax Increases Carolinas AGC ensured that the new state sales tax hikes in North Carolina have leeway for construction projects in progress. Before September 1, 2009, the state sales tax was 4.75 percent. The tax rate for sales made from September 1, 2009 to September 30, 2009 was 5.5 percent. The rate increased to 5.75 percent from October 1, 2009 until the legislation sunsets on July 1, 2011. Specifically, the new law says that it "does not apply to construction materials purchased to fulfill a lump-sum or unit-price contract entered into or awarded before the effective date of the increase or entered into or awarded pursuant to a bid made before the effective date of the increase when the construction materials would otherwise be subject to the increased rate of tax..." Sales Tax Rates for the 100 Counties: The following is an explanation by the N.C. Department of Revenue about sales tax changes: North Carolina Department of Revenue IMPORTANT NOTICE: SIMULTANEOUS CHANGE IN STATE AND LOCAL RATES, Effective October 1, 2009, the general State rate of tax increases from 5.5% to 5.75%. The local rate decreases from 2.25% to 2% in all counties except Alexander, Catawba, Cumberland, Haywood, Martin, Pitt, Sampson, and Surry where the county rate decreases from 2.5% to 2.25%. Mecklenburg County continues to impose an additional 0.5% Transit rate. The third one-half cent local tax previously reduced to a quarter cent (0.25%) under Article 44 will decrease to zero. The combined State and local rate will continue to be 7.75% in ninety-one counties, 8% in Alexander, Catawba, Cumberland, Haywood, Martin, Pitt, Sampson, and Surry Counties and 8.25% in Mecklenburg County. These changes occur as the State continues assuming Medicaid responsibilities for the counties. G.S. 105-164.16(e) provides that, when the State and local sales and use tax rates change on the same date because one increases and the other decreases but the "combined general rate" does not change, sales and use taxes payable on the gross receipts from the following periodic payments are reportable in accordance with the changed or "new" State and local rates: (1) Lease or rental payments billed after the effective date of the changes. The "combined general rate" as defined in G.S. 105-164.3(4a) that applies to sales of telecommunications and ancillary services, video programming, and spirituous liquor other than mixed beverages does not change as a result of the simultaneous changes in the State and local rates and remains at 8%. Questions about this notice can be directed to the Taxpayer Assistance and Collection Center at telephone number 1-877-252-3052 (toll-free) or in writing to the Taxpayer Assistance Division, North Carolina Department of Revenue, Post Office Box 25000, Raleigh, North Carolina 27640-0001. In addition, information also is available by clicking here:
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