On May 29, 2014, North Carolina adopted new legislation to clarify the North Carolina Department of Revenue’s interpretation of when North Carolina state and local sales tax will be due on gross receipts collected from rentals of private residences, cottages or similar accommodations. These new rules apply to gross receipts collected after June 1, 2014.
New N.C.G.S. 105-164.4F replaces former N.C.G.S. 105-164.4(a)(3) and provides that North Carolina state and local sales tax will continue to be due on gross receipts collected from rentals of private residences, cottages or similar accommodations, unless the rental qualifies for an exception to the sales tax rules.
However, where the property is listed for rent through a broker or agent, the rental agent, and not the home owner, is responsible for collecting and paying the sales tax.
Also, there are some exceptions to the new rules.
First, if a residence is rented for less than 15 days in a calendar year, then the rental is not subject to sales tax unless the property is listed with a broker or agent for rental. This is a change from prior law; under prior law, regardless of whether the property owner used a broker or real estate agent, if the property was rented for less than 15 days a year, then the rental was not subject to sales tax.
And in all events, if the property is rented for more than 14 days in a year, then sales tax will be due on the rentals, regardless of whether the property is rented through an agent. And, if no broker or agent is used, the property owner will have to obtain a sales and use tax registration number and will then have to start collecting sales tax and filing sales tax returns.
Under a second exception to the sales tax rules, an accommodation that is supplied to the same person for a period of 90 or more continuous days is not subject to sales tax. Of course, if a landlord’s long-term lease with a tenant expires and then becomes a month-to-month lease, then the landlord presumably will have to start charging sales tax on the month-to-month rental.
Finally, accommodations provided to a person by a school or a camp will not be subject to sales tax.
New N.C.G.S. 105-164.4F (House Bill 1050), May 29, 2014.