If the saying that nothing is certain in life but death and taxes is true, then North Carolina residents have one more thing they can be sure of.
A new sales tax on car repairs and other previously exempt services went into effect Tuesday.
“It is what it is,” said Earlie Gilley, an employee at Mount Airy Tire & Automotive.
A variety of professional services are included in the law, such as watch, clock and jewelry repair, cleaning and engraving and shoe repair and polishing.
Charging a tax on labor for car repairs – instead of just for the parts – is at the top of the list.
It marks the end of an era.
“They have never done that since I’ve been working here,” said David Wilson, shop manager who has been in the business for about 30 years.
“So far nobody has fussed at us which is a good thing.”
The budget passed by the Republican-led General Assembly in September 2015 expanded the sales tax by repealing certain exemptions while reducing the individual income tax.
Individual income tax rate cuts start in 2017 and standard income tax deductions were raised this year.
“The whole problem we’ve seen so far is we’re this close to Virginia. They can just go up there,” where the sales tax is cheaper, Gilley said. “They can get cheaper gas while they’re up there. They don’t see that it’s hurt our local businesses.”
For Luis Medina, a customer at the garage on Thursday, tacking on the seven percent Surry County tax rate didn’t add much to his bill for replacing the shocks on his automobile, which resulted in a $32.50 labor charge.
For bigger jobs, “It makes a difference,” Wilson said.
“I just wonder where the money goes,” Medina said.
The legislation distributes the additional tax revenue to smaller, rural counties for economic development, public education and community colleges.
Surry County will receive none of the $84.8 million to be redistributed in the fiscal year beginning July 1, 2016, according to the bill.
Determining what services require the tax depends on if the business providing the service meets the bill’s definition of a retail trade.
“It’s really confusing,” said Scott Payne, owner of Fashion Floors of Mount Airy.
Payne said it took him a while to sort through N.C. Department of Revenue notices to determine that he was considered a “real property contractor” under the new laws, and therefore not required to collect sales charge for installation services.
Maintaining the exemption came as a relief to the business owner.
“Labor is pretty substantial,” Payne said, which in his line of work comprises about 30 percent of the total cost for a job.
“If labor is at least a third, it’s really increasing the purchase price by at least three to five percent,” he said. “It could prevent people from making a purchase.”
Online purchases from sales tax free states also become more attractive for consumers.
“That’s an unfair burden on brick and mortar stores,” he said, with the benefit of savings from reduced income taxes unclear.
“It’s hard to say income tax versus a sales tax. If you don’t have any income, you still have to drive a car,” he said, with those unable to afford newer cars needing fewer repairs at a disadvantage.
“The crux of it is it’s a tax that really impacts the average person.”
Reach Terri Flagg at 415-4734.