Sales Tax on Linens Clarification
With the August 31 release of the below memo clarifying the collection and payment of sales taxes on linens, it appears we did not get far in arguing our case to the NC Department of Revenue and NC legislators that by paying sales taxes to a linen company for the rental of linens and then charging the consumer sales taxes for the rental of the linens was “double” charging. However, there are circumstances where assessments may be modified. Thanks to David Pergerson, Carolina Designs Realty, for sharing this information.
IMPORTANT NOTICE: SALES AND USE TAXES – ACCOMMODATIONS AND LINENS
The Governor signed into law S.L. 2017-204 that amended Article 9 of Chapter 105 of the General Statutes effective August 11, 2017 by adding a new section:
“§ 105-244.4. Reduction of certain sales tax assessments.
(a) Reduction – The Secretary may reduce an assessment against a taxpayer for State and local sales and use taxes in the amount as provided in this section and waive any penalties imposed as part of the assessment when the assessment is the result of an audit of the taxpayer by the Department and all of the following apply:
(1) The taxpayer remitted to the Department all of the sales and use taxes it collected during the audit period.
(2) The taxpayer had not been informed by the Department in a prior audit to collect sales and use taxes in the circumstance that is the basis of the assessment, as reflected in the written audit comments of the prior audit.
(3) The taxpayer had not requested and received from the Department a private letter ruling advising to collect sales and use taxes in the circumstance that is the basis of the assessment.
(4) The assessment is based on the incorrect application of one or both of the following areas of the sales and use tax statutes:
a. The failure to collect sales tax on separately stated linen charges where the linens are furnished by a facilitator, rental agent, or other person and the charges are part of the gross receipts derived from the rental of the accommodation taxed in accordance with G.S. 105-164.4F.
b. The failure to pay sales or use tax on the rental of linens used by a facilitator, rental agent, or other person in providing the rental of an accommodation taxed in accordance with G.S. 105- 164.4F where the facilitator, rental agent, or other person issued a certificate of exemption or the required data elements per G.S. 105-164.28 to the lessor.
(5) The taxpayer files a written request with the Secretary no later than 120 days following the receipt of a proposed assessment to request the amount of sales or use taxes be reduced as provided in this section citing the specific reasons therefor. A taxpayer who does not agree with a proposed assessment must also file a request for review within 120 days of the date of the notice of proposed assessment as provided in G.S. 105-241.11 in order for a request to reduce the amount of tax as allowed by this section to be considered by the Secretary.
(b) Amount. – A sales and use tax assessment against a taxpayer may be reduced by ninety percent (90%) of the total amount of sales and use tax assessed. The Secretary may also waive all penalties that were imposed as part of the assessment. A reduction of an assessment under this section and the waiver of penalties imposed as part of the assessment apply only to the amount of the assessment attributable to the incorrect application of one or both of the areas of the law listed in subdivision (a)(4) of this section.
(c) Application. – This section applies to the following for a tax period ending prior to January 1, 2018:
(1) A proposed assessment or portion of a proposed assessment.
(2) An assessment that becomes collectible under G.S. 105-241.22.
(3) A pending request for review case.
(4) This section does not authorize a refund for sales or use taxes that were originally collected and remitted to the Department.
(d) Expiration. – This section is not applicable to an assessment attributable to the incorrect application of one or both areas listed in subdivision (a)(4) of this section for a period beginning on or after January 1, 2018.”
Request for Reduction
A taxpayer, who meets all of the requirements of N.C. Gen. Stat. § 105-244.4(a) and who would like the Secretary to consider allowing a reduction to the sales and use tax assessment against the taxpayer, must file a written request citing the specific reasons no later than 120 days following the receipt of the proposed assessment. Additionally, in order for a request to reduce the amount of tax as allowed to be considered by the Secretary, the taxpayer must also file a request for review within 120 days of the date of the notice of proposed assessment by submitting a completed form NC-242, Objection and Requested for Departmental Review. Both the written request and the completed form NC-242 should be mailed to the following address:
Attention: Sales and Use Tax Director
NC Department of Revenue
PO Box 871
Raleigh, NC 27602-0871
Gross Receipts Derived from the Rental of an Accommodation
As provided in Sales and Use Tax Technical Bulletin Section 27, following are examples of charges or fees that are part of the gross receipts derived from the rental of an accommodation and subject to the general 4.75% State, applicable local (2.00% or 2.25%), and applicable transit (0.50%) rates of sales and use tax no matter if the charge or fee for such is separately stated on the invoice or other documentation provided by the retailer or facilitator:
1. Credit card fees;
2. Damage fees;
3. Early/late departure fees;
4. Extra person charges;
5. In-room safe rentals;
6. Inspection fees;
7. Linen fees; [emphasis added]
8. Maid/cleaning fees;
9. “Peace of mind” fees (similar to insurance but provided by hotel or rental agency rather than third-party
10. Pet fees (incurred by guests who have pets traveling with them);
11. Reservation fees (also referred to as a handling, processing, or administrative fee);
12. Security deposits;
13. Smoking fees;
14. Transfer fees (for changing to a different room or unit or a different date);
15. Tentative reservation fees (for priority reservation the following year);
16. Charges for cribs and roll-away beds; and
17. Charges for microwave ovens and refrigerators.
Purchase, Lease, or Rental of Linens
The purchase, lease, or rental of linens by a retailer or facilitator of a rental of an accommodation continues to be subject to the general 4.75% State, applicable local (2.00% or 2.25%), and applicable transit (0.50%) rates of sales or use tax on the purchase price at the time of purchase, lease, or rental. Such linen purchases, leases, or rentals are subject to sales and use tax no matter if the linens are optional or provided for a fee by the accommodation retailer or facilitator to a person renting an accommodation. A retailer or facilitator of a rental of an accommodation, who has issued a certificate of exemption or otherwise erroneously advised a linen retailer that such purchases, leases, or rentals are exempt from sales and use tax, should provide notice to the linen retailer to begin charging tax.
To the extent there is any change in the rate or amount of tax, change to a statute or regulation, or new case law subsequent to the date of this notice, the provisions in this important notice may be superseded or voided. To the extent that any provisions in any other notice, directive, technical bulletin, or published guidance issued prior to the date of this notice conflicts with this important notice, the provisions contained in this important notice supersede.
Live/Own Property in Kill Devil Hills – Participate in the Land Use Plan Survey!
The Town of Kill Devil Hills is updating its Land Use Plan. This important document provides policy guidance for future growth and development. All property owners and residents are encouraged to provide the Town with their input and opinions by completing the survey. This information will be extremely valuable to the Board of Commissioners as it gauges attitudes on growth and development.
The questionnaire can be accessed hereand will close on Friday, September 29, 2017.
Please take the time to complete the survey.
As Abe Lincoln once said, “You don’t have the right to complain if you don’t have the heart to help!” It only takes a few minutes of your time. If you have any questions please call the Planning Department at (252) 449-5318.
Dare County – September 1st Kitty Hawk and Buxton beach nourishment project update.
Good news for NFIP policyholders in unincorporated Dare County – Dan Brubaker, the NFIP Coordinator for the NC Department of Public Safety, provided Dare Commissioners with an overview of the Community Rating System (CRS) on Tuesday and announced that Dare County had obtained an additional 5% discount for all flood insurance policyholders in unincorporated Dare County. The County’s efforts to implement several zoning and policy changes to further mitigate flood hazards caused the County earn additional CRS points, thus changing the rating designation from an 8 to a 7. The prior rating of 8 afforded policyholders a discount of 10%; a rating of 7 gives policyholders a 15% discount. Brubaker explained that there are currently 8,973 flood policies in force in unincorporated Dare with $6,109,672 (annually) paid in premiums. This equates to an average policy premium of $681 and county-wide savings of $948,699 (annually). The 15% discount will now save $106 per policy average (annually) or an additional $35 per policy savings over the prior Class 8. The overall community-wide savings under the lower rating equates to $307,678 annually.
Congrats to Dare Planner Donna Creef and the CRS Committee for their hard work in making this happen!
Currituck County – At the September 5th Board of Commissioners meeting, new regulations for the use of public parks, public boat ramps and public beach accesses will be considered. A full update will be included in next week’s briefing.
Nags Head– The Board of Commissioners meets this week and will hold public hearings to consider the following:
• A zoning ordinance text amendment submitted by the Fraternal Order of Eagles to allow Private Clubs with a 501(c)(8) status as a permitted use within C-2, General Commercial Zoning District;
• A zoning map amendment submitted by Albemarle & Associates, Ltd. on behalf of TLG Greenwater Investments, LLC to rezone the eastern portion of Lot 2a-1 of Charles Sineath Subdivision from C-3 Commercial Services to C-2 General Commercial;
• If the zoning map amendment above is approved, a site plan submitted by Albemarle & Associates, Ltd. on behalf of Bottom Rig, LLC for construction of a 4,250 sf accessory structure to accommodate storage for existing TW’s Bait and Tackle.
Also at Wednesday’s meeting at 10:30 a.m. – There will be a Flood Map Presentation by Rick Luettich, Director, UNC-CH Institute of Marine Sciences. At a prior meeting, Commissioners requested that a consultant be brought in to discuss issues and challenges with Dare’s preliminary flood maps that show almost 75% of properties coming out of special flood hazard areas.
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Wednesday, September 6
9:00 a.m. – Nags Head Board of Commissioners
6:30 p.m. – Manteo Board of Commissioners
7:00 p.m. – Duck Town Council
Thursday, September 7
9:00 a.m. – OBAR Board of Directors
Monday, September 11
5:30 p.m. – Kill Devil Hills Board of Commissioners
Tuesday, September 12
6:00 p.m. – Manteo Planning and Zoning
7:00 p.m. – Currituck Planning Board – CANCELLED
Wednesday, September 13
6:30 p.m. – Duck Planning Board