Bill Summary for S 523 (2019-2020)

Summary date: 

Jun 13 2019

Bill Information:

View NCGA Bill Details2019-2020 Session
Senate Bill 523 (Public) Filed Tuesday, April 2, 2019
AN ACT TO MAKE VARIOUS CLARIFYING AND ADMINISTRATIVE CHANGES TO THE REVENUE LAWS.
Intro. by Tillman, Hise, Newton.

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Bill summary

Senate committee substitute to the 1st edition makes the following changes.

Part III. Sales and Use Tax Changes

Eliminates the proposed changes to the terms capital improvement and lease or rental as defined in GS 105-164.3, which modified the scope of the terms to include improvement or transfer of certain digital property.

Amends the proposed changes to GS 105-164.6 regarding complementary use tax to impose the complementary use tax on certain digital property purchased (was, purchased, leased, or rented) inside or outside the state for storage, use, or consumption in the state so long as the property is subject to tax under GS 105-164.4 (providing for the privilege tax imposed on retailers).

Further amends GS 105-164.13 to exempt from sales and use tax sales of items to the NC Life and Health Insurance Guaranty Association.

Makes the following modifications to the proposed changes to GS 105-164.4 (Tax imposed on retailers and certain facilitators). Specifies that the combined general tax rate on retailers applies to the gross receipts derived from providing telecommunications service and ancillary service or video programming to a subscriber in the state, and sales of electricity and piped natural gas, including any separately stated charges billed to a customer for repair, maintenance, and installation services or a contribution in aid of construction (previously, specified for the installation of utilities only).

Modifies the proposed changes to GS 105-164.3 to further amend the definition of capital improvement to include the installation of a transmission, distribution, or other network asset on land owned by a service provider or on a right-of-way or easement in favor of a service provider (previously, included installation of utilities on utility-owned land, a utility right-of-way, or a utility easement), no matter that any separately stated charges billed to a customer for repair, maintenance, and installation services or a contribution in aid of construction are included in the gross receipts derived from services subject to the combined general tax rate under GS 105-164.4 (previously, provided for the inclusion notwithstanding that a utility could recover a portion of the cost of the installation as a contribution in aid of construction and that those charged are included in the gross receipts derived from services subject to the combined general tax rate). Defines services provider and lists the provision of services applicable under the provision to include telecommunications service or ancillary service, video programming, and electricity or piped natural gas, or water or sewer service. Further amends GS 105-164.13 to make conforming changes to include in the sales and use tax exemption services performed on a transmission, distribution, or other network asset on land owned by a service provider or on a right-of-way or an easement in favor of a service provider. Maintains the proposed change that the exemption does not apply to charges included in the gross receipts derived from services subject to the combined general rate under GS 105-164.4, more specifically referring to charges billed to a customer for repair, maintenance, and installation services or a contribution in aid of construction. Adds statutory cross-references to define service provider and governmental entity

Amends the proposed definition of property management contract in GS 105-164.3 to eliminate the specifications regarding the contract amount. Additionally, amends the proposed term property management services, now more specifically termed as real property management services, and modifying the definition to include providing repair, maintenance, and installation services to comply with obligations of a homeowners’ association or a landlord under a lease, rental, or management agreement (no longer requiring the direct provision of these services, and no longer including the provision of these services for compliance with facility-related needs of the real property’s occupants). Also provides that real property management services includes incurring and paying expenses for the management, repair, and maintenance of the real property (was, incurring and paying expenses derived from the operation of the real property). Terms "property manager" as "real property manager." Makes further conforming changes. 

Amends proposed GS 105-164.4K concerning the taxability of services under a real property management contract. Makes conforming terminology changes to refer to real property managers and real property management services. Eliminates the provision exempting property management services provided by a property manager under a property management contract from sales and use tax other than as provided in the statute. Subjects services to sales and use tax when more than 25% of the time spent managing the real property for a billing or invoice period is attributable to taxable repair, maintenance, and installation services and not otherwise excluded under the statute (previously, when more than 25% of the specified contract amount payable during the period of the contract or per year for the taxable services). Clarifies that under this circumstance, the tax applies to the sales price of or the gross receipts derived from the taxable services portion of the property management contract. More specifically requires the real property manager to determine an allocated sales price for the services portion of the contract based on a reasonable allocation of revenue supported by the person’s business records kept in the ordinary course of business. Clarifies that the charges for the services must be separately stated on the invoice given to the customer at the time of sale. Adds tax exemptions for the real property manager’s troubleshooting, inspecting, and monitoring of the real property pursuant to the real property management contract, as specified. Adds requiring substantiation for tax exemption for the services. Adds a grace period, prohibiting the Department of Revenue from taking action to access any tax due for a filing period beginning on or after January 1, 2019, through January 1, 2021, if the retailer did not assess tax on the specified taxable services. Makes the grace period inapplicable to retailers who received specific written advices from the Secretary of Revenue for the transactions at issue for the applicable period. Makes further clarifying, conforming, and technical changes. 

Amends GS 105-237.1 to allow the Secretary of Revenue to compromise a taxpayer’s liability when the Secretary determines it is in the best interest of the State and finds the assessment is for sales tax the taxpayer failed to collect for or use tax the taxpayer failed to pay on specified services provided by a real property manager under a property management contract. Requires the Secretary to determine the taxpayer made a good-faith effort to comply with the law, which is presumed if the taxpayer substantiated the time spent managing real property for the specified period, absent fraud or other egregious activities. 

Amends GS 105-164.13(11) to exclude from the sales and use tax exemption for specified motor fuel, motor fuel eligible for a monthly refund under GS 105-449.105A.

Further amends GS 105-164.13 to exempt from sales and use tax limited-service vehicle washes in addition to self-service car washes and vacuums. Defines limited-service vehicle washes to include the cleaning of a vehicle by mechanical means where the only activities performed by an employee include receipt of payment, guiding the vehicle, applying low-pressure spray of chemicals, or placing protective tape or covers on the vehicle; excludes activities whereby the employee physically touches the vehicle for cleaning or restoring purposes, enters or cleans the vehicle’s interior, or any other activity. Defines self-service vehicle washes and vacuums to exclude any employee-performed activity. Applies to sales made on or after October 1, 2019.

Amends proposed GS 105-113.4F concerning delivery sales of certain tobacco products. Eliminates the provisions concerning delivery service requirements, including requiring that the delivery seller must obtain the signature and proof of age of the person accepting the delivery. 

Eliminates the proposed changes to GS 105-449.81, which made changes to include in the motor fuel rate tax fuel alcohol. 

Eliminates the proposed changes to GS 105-449.105A to remove kerosene sales for the purpose of heating from those distributors who can obtain a monthly refund.

Amends GS 105-113.29 to make it illegal to maintain a place of business required to be licensed to be engaged in the business of selling, offering for sale, or possessing with the intent to sell (was, selling or offering for sale only) cigarettes or other tobacco products without obtaining the licenses first. Effective December 1, 2020.

Changes the effective date of the changes to GS 105-243.1 from when the act becomes law to January 1, 2020.

Amends GS 105-241.22, allowing the Department of Revenue to collect tax when a petition for a contested case at the Office of Administrative hearings is dismissed and the period for timely filing a petition has expired (was, when the Office dismisses a petition only for lack of jurisdiction due to the constitutionality of a statute, and not the application of a statute).

Adds new Part VII. Other Changes

Amends GS 66-252 concerning peddlers and sellers at specialty markets, to deem the requirement to display a certificate of registration to be satisfied when the vendor displays evidence that the certificate has been applied for within 30 days before the date the certificate was required to be displayed (no longer also requiring the applicable registration fee to have been paid).

Makes conforming organizational changes. 

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