Service Contracts

The sales price of or the gross receipts derived from a service contract or the renewal of a service contract sold at retail is subject to the general State and applicable local and transit rates of sales and use tax. A service contract is sourced in accordance with the sourcing principles set forth in N.C. Gen. Stat. § 105-164.4B. The retailer of a service contract is required to collect the tax at the time of the retail sale of the contract and is liable for payment of the tax.

Gross receipts derived from a service contract or the renewal of a service contract and the sales and use tax thereon are to be reported to the Department on Form E-500, Sales and Use Tax Return, or through the Department’s online filing and payment system.

Technical Publications for Service Contracts

• Sales and Use Tax Bulletins - See Service Contracts and Warranties Bulletin
• Updated Important Notice:  Sales Tax Base Expansion Protection Act (09-10-18)
• Important Notice: Principles of Sourcing the Renewal of a Service Contract for Prewritten Computer Software (09-10-18)
• Important Notice: Sales Tax Base Expansion Protection Act (9-6-17)
• Important Notice: Service Contracts (11-15-16)
• Important Notice: Motor Vehicle Service Contracts (11-15-16)
• Important Notice: Exemption for Service Contract Sold to a Professional Motorsports Racing Team or Related Member (10-26-16)
• Important Notice: Taxability Matrix Changes Regarding Software Support Services (3-16-16)
• Important Notice: Service Contract for One or More Components, Systems, or Accessories for a Motor Vehicle - Taxable (2-19-16)
• Important Notice: Motor Vehicles (Installation Charges; Repair, Maintenance, and Installation Services; and Service Contracts) (2-11-16)
• Important Notice: Sale or Renewal of a Service Contract for Tangible Personal Property Changes (2-2-16)
• Important Notice: Service Contract for a Qualified Jet Engine (1-14-16)
• Important Notice: Service Contracts (9-26-14)
• Important Notice: Sales and Use Tax on Service Contracts for Motor Vehicles Subject to Highway Use Tax (2-7-14)
• Important Notice: Collecting Sales Tax on Service Contracts (1-23-14)
• Directive SD-14-1: Optional Service Contracts for Portable Toilets (1-17-14)
• Directive SD-13-5: Service Contracts (12-23-13; Revised 1-17-14)