Henderson Daily Dispatch

Regulations On Sales Tax Begin July 1

Rules on Wholesale Merchants and Wholesale Sales to Be Tightened Up.

Daily Dispatch Bureau,
In the Sir Walter Hotel,
BY J. C. BASKERVILL.

Raleigh June 10-Many changes are being made in the new sales tax rules and regulations being formulated by the Department of Revenue and which will go into effect July 1 and supersede the present rules and regulations, it was learned from an authoritative source today.

The regulations governing wholesale merchants and wholesale sales are especially going to be tightened up it was learned, so that merchants will no longer be able to sell goods in large lots to contractors, mills, factories

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Regulations On Sales Tax Begin July 1

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tories, office buildings, and so forth, at wholesale prices and without charging the three per cent sales tax. The law expressly specifies that wholesale sales are those made for the purpose of re-sale only. Consequently all other sales must be retail sales, regardless of the quantity sold.

Another rather drastic change is going to be in the ruling applying to contractual services, which will not be subject to the sales tax. Thus no sales tax can be charged on the filling of prescriptions at drug stores, on garage bills at garages, charges made by contractors, plumbers or electricians-nor on the materials used by any of these in performing contractual services. Thus garages can no longer charge the sales tax on parts used in doing a repair job on an automobile, since the parts are included in the price charged for the entire repair job as part of the service performed. Nor can contractors or electricians or plumbers charge the sales tax on lumber, doors, windows, hardware, electric fixtures or appliances or plumbing fixtures installed under a contract.

"If an individual goes into an electrical store and buys several electric appliances, such as a refrigerator, washing machine and water heater, he must of course pay the sales tax," an official of the Department of Revenue pointed out. "But if he signs a contract with an individual or corporation for the construction of a house, to include such equipment as electrical appliances and plumbing and heating fixtures, the contractor cannot charge the sales tax to his client on these articles, since they are furnished as a part of the contractual service."

If a contractor, however, wishes to buy a keg of nails, 50 gallons of paint, bath room fixtures and electrical fixtures for the construction of a house, he must either buy these direct from the manufacturer or else pay the three per cent retail sales tax, it was pointed out, since none of these articles are bought for resale but to be used in the rendering of a contractual service.

"We are going to rule that any sale that is not made for re-sale is a retail transaction and hence subject to the three cent retail sales tax," this same official of the Department of Revenue continued. "As a result, if a contractor buys several kegs of nails or a mill buys an order of hardware from a local hardware store, they will have to pay the three per cent retail sales tax instead of the wholesale tax of one-twentieth of one per cent, since it is impossible to construe such sales as being for re-sale. However, a carpenter or contractor or mill or office building con purchase materials needed from the manufacturers without having to pay either the wholesale tax or the retail sales tax.

"Thus a plumber can agree to install the plumbing and bath room fixtures in a house, purchase the pipe and fixtures direct from the manufacturer and not have to pay any sales tax or charge any to the person for whom he is installing it under contract--for his selling his services as well as the materials. But if he should sell a bath tub and some pipe to a home owner and the home owner should install the pipe and bath tub himself, then the plumber would have to collect the retail sales tax from the home owner."

During the past two years the rules and regulations have permitted merchants to sell large quantities of goods at wholesale prices and at the wholesale tax rate, regardless of whether the goods were sold for re-sale or not, it was pointed out. But the new rules and regulations are going to be much more strict, it was indicated. It is also believed they will bring in much additional revenue.