A BILL TO BE ENTITLED
AN ACT to modify the sales tax on labor.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 105‑164.3 reads as rewritten:
"§ 105‑164.3.  Definitions.
The following definitions apply in this Article:
…
(33g)	Repair, maintenance, and installation services. – The term includes the activities listed in this subdivision:
a.	To keep or attempt to keep tangible personal property, other than a motor vehicle, in working order to avoid breakdown and prevent repairs.
b.	To calibrate, restore, or attempt to calibrate or restore tangible personal property, other than a motor vehicle, to proper working order or good condition. This activity may include replacing or putting together what is torn or broken.
c.	To troubleshoot, identify, or attempt to identify the source of a problem for the purpose of determining what is needed to restore tangible personal property, other than a motor vehicle, to proper working order or good condition.
d.	To install or apply tangible personal property except tangible personal property installed or applied by a real property contractor pursuant to a real property contract.
…
(38b)	Service contract. – A contract where the obligor under the contract agrees to maintain or repair tangible personal property, other than a motor vehicle, regardless of whether the property becomes a part of or is affixed to real property. Examples of a service contract include a warranty agreement other than a manufacturer's warranty or dealer's warranty provided at no charge to the purchaser, an extended warranty agreement, a maintenance agreement, a repair contract, or a similar agreement or contract.
…."
SECTION 2.  G.S. 105‑164.13 reads as rewritten:
"§ 105‑164.13.  Retail sales and use tax.
The sale at retail and the use, storage, or consumption in this State of the following tangible personal property, digital property, and services are specifically exempted from the tax imposed by this Article:
…
(61a)	Repair, maintenance, and installation services if one or more of the following is met:
a.	It is provided for an item for which a service contract on the item is exempt from tax under G.S. 105‑164.4I.
	
b.	It is purchased for resale.
(62)	An item or repair, maintenance, and installation services used to maintain or repair tangible personal property pursuant to a service contract taxable under this Article if the purchaser of the contract is not charged for the item or services. For purposes of this exemption, the term "item" does not include a tool, equipment, supply, or similar tangible personal property used to complete the maintenance or repair and that is not deemed to be a component or repair part of the tangible personal property for which a service contract is sold to a purchaser.
…."
SECTION 3.  G.S. 105‑164.4I(b) reads as rewritten:
"(b)	Exemptions. – The tax imposed by this section does not apply to the sales price of or the gross receipts derived from a service contract applicable to any of the following items:
(1)	An item exempt from tax under this Article.
(2)	A transmission, distribution, or other network asset contained on utility‑owned land, right‑of‑way, or easement.
(3)	A transmission, an engine, rear‑end gears, and any other item purchased by a professional motorsports racing team or a related member of a team for which the team may receive a sales tax refund under G.S. 105‑164.14A(a)(5). This subdivision expires January 1, 2020.
(4)	An item subject to tax under Article 5F of Chapter 105 of the General Statutes.
(5)	A qualified aircraft or a qualified jet engine.
(6)	A motor vehicle."
SECTION 4.  This act becomes effective July 1, 2016, and applies to sales made on or after that date.