Certain Pest Control Services May Now Be Taxable
NCPMA Urges Companies to Check with Tax Professionals
Some, but not all, pest control services may now be subject to the North Carolina Sales and Use Tax.
The North Carolina Pest Management Association is working to get more clarity for our members, while also advocating against the tax in the North Carolina General Assembly. Senate bill 628 was enacted into law in August 2017 and redefined "pest control services" for the purposes of tax exemption eligibility. As a result of this change, pest control services that are exempt from the sales and use tax only apply to the application of pesticides to real property.
In the new law, pest control services are defined as:
"Pest control service. For purposes of this exemption, the term 'pest control service' means the application of pesticides to real property."*
** It is important to check with your tax advisor for more information and to determine how this will directly impact your business.**
WHAT THIS MEANS
The newly written definition of "pest control services" creates uncertainty in regards to a wide range of pest management services subject to taxation. Historically, many of these services have not been taxed. The definition in the new law contradicts the statutory language that has been in place for more than six decades and is still referenced by the Department of Agriculture.
The Department of Revenue provides information defining which services are tax-exempt and which are not. It classifies Capital Improvements or Repair, Maintenance and Installation Services in
WHAT WE'RE DOING
NCPMA strongly opposed this change and continues to work diligently to get it revised.
We have proposed and are advocating for new language to legislative leaders to pass as quickly as possible. We have been assured by members in both the Senate and the House that the new definition of "pest control services" was an oversight, and they are agreeable to finding a solution and working with our association.
Our proposed change would amend the existing statute to rewrite the definition of "pest control service" as "the gross proceeds of the sale or sales of any company providing pest control services as defined in N.C.G.S. 106-65.13 (23)." This would clarify the question of what is or is not taxed since the statute clarifies what is or is not pest control, and we are all familiar with the enforcement authority of the Structural Pest Control Division.
This technical correction would refer back to the definition of "pest control services" that the industry has operated under for more than sixty years.
WHAT ABOUT SERVICES RENDERED OUTSIDE OF GENERAL PEST CONTROL?
Many of our member companies offer additional services that do not include pesticide applications.
It is recommended that each company consult their own attorney and/or tax advisor about what services should or should not be taxed. Below are a few guidance documents published by the Department of Revenue clarifying which services are and are not subject to the sales tax.
Form E-505 (9-17)
- Section "Certain Repair, Maintenance, and Installation Services and Service Contract Exemptions"
- Section d speaks to the cleaning of real property
- Section f speaks to the removal of waste, trash, debris, grease, snow and other similar items from property (NCPMA is working to get clarity on if this includes moisture control since it is the removal of water)
- Section g speaks to inspections where the results are included in a report for the sale or financing of real property
- Section i. Pest control service. For purposes of this exemption, the term 'pest control service' means the application of pesticides to real property
WHAT YOU CAN DO
Tuesday, Jan. 23 from 10 a.m. - 11:30 a.m. at the NCPMA 2018 Pest Control Technician's School to learn more about how this will impact our industry. We will be discussing this issue and will have representatives from the N.C. Department of Revenue on hand to answer questions. More details to follow soon!
As NCPMA continues to talk with our legislative leaders and discuss a revision to this new language, talk with your tax advisor and financial professional about how this may impact your business.
We have included some information below for review: