Come Jan. 1, you'll pay more for many common services
RALEIGH (WTVD) -- Come January 1, a new batch of services will cost you just a little more in North Carolina, courtesy of a new tax on a lot of repair work, maintenance, and installation services.
The news hit Isaac Wilson hard.
"I get this letter on Saturday that states starting January 1st, I have to start taxing people I do work for," Wilson said.
Wilson is an electrician by trade and owns a small business in Raleigh. He says in 20 years, he's never taxed people for his services and has no idea where to begin.
"Now, all of a sudden, from being an electrician, I've got to be a tax collector. And I'm not set up to collect tax," Wilson complained.
The one-page letter Wilson said arrived in his mailbox during the weekend didn't offer any guidance on how to collect tax, how much to collect, what to collect tax on, or where to send it.
"This letter pretty much just tells me, 'Hey, come January 1st, you're collecting sales tax," he said.
Wilson said he doesn't have any systems in place to collect tax and will likely have to lay out money - either up front or ongoing - to satisfy the new requirement from the state.
The change is part of a sweeping set of reforms put into place by Republican legislators in 2013 and updated in the last legislative session.
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The ratified FY17 budget passed in July 2017: (READ THE ENTIRE BILL HERE)
Page 198: Sales Tax Changes portion of state budget starts here.
Page 199: Definition provided regarding activities that are considered repair, maintenance, and installation services under new tax law changes
Page 201: "Service contract" defined
Page 204: Exemption of certain service contracts under new tax law changes listed.
Page 204: Exemption of various repair, maintenance, and installation services under new law changes are listed.
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As part of a broader effort to reduce corporate and personal income taxes, lawmakers set about dramatically expanding sales tax in North Carolina.
That effort began with the expansion of the number of goods and services taxed and starting next year, will further expand to include most repair, maintenance, and installation services.
Of course, there are often exemptions laid out in such laws and this is no exception.
"I read this, and frankly, my eyes glaze over," said NC State Economics professor Mike Walden. "And I think, 'my gosh, this is so complex.' What they've done is, instead of simply saying, 'We're going to tax all services,' they've sort of gone through and picked and then added exemptions."
Services including home inspections (some, not all), landscaping, alterations on clothes (but not every time), pest control, moving, and self-service car washes won't be taxed and that doesn't sit well with Isaac Wilson.
"That's not fair," Wilson said, standing in front of a massive moving truck across the street from the house where he was doing electrical work. "They're providing a service too, same as me."
Another oddity to the law that concerns both Wilson and Walden is something economists call 'a cascading tax.'
"That's where one tax sparks another tax on down the supply chain line," said Walden. And Wilson says he expects at least some of his customers will get taxed more than once on services or goods.
Wilson said he's already reached out to the Governor's team on Facebook and intends to call to let his feelings be known.
His hope: that other people will feel as outraged by the new law as he is and "flood the governor's office with phone calls" trying to overturn the new law.
He's even offered his own business, All Wired Up, as a rallying point.
A reversal of the law is unlikely to happen. The legislature doesn't look tangibly different from when it passed the 2013 law in the first place or when lawmakers revised it last year. But as Walden points out (and is pushing for), lawmakers can make changes to the law.
"The complications that they've added to the tax code by broadening the services, exempting some services, not exempting other services," Walden said, "I think that's going to be a bugaboo in the tax system down the road."
