North Carolina § 105-164 - 12B. Tangible personal property sold below cost with conditional contract.

§ 105-164. 12B. Tangible personal property sold below cost with conditional contract.

Conditional Contract Defined. - A conditional contract is a contract in which all of the following conditions are met: A seller transfers an item of tangible personal property to a consumer on the condition that the consumer enter into an agreement to purchase services on an ongoing basis for a minimum period of at least six months. The agreement requires the consumer to pay a cancellation fee to the seller if the consumer cancels the contract for services within the minimum period. For the item transferred, the seller charges the consumer a price that, after any price reduction the seller gives the consumer, is below the purchase price the seller paid for the item. The seller's purchase price is presumed to be no greater than the price the seller paid, as shown on the seller's purchase invoice, for the same item within 12 months before the seller entered into the conditional contract. Tax. - If a seller transfers an item of tangible personal property as part of a conditional contract, a sale has occurred. The sales price of the item is presumed to be the retail price at which the item would sell in the absence of the conditional contract. Sales tax at the general rate under G.S. 105-164.4(a) is due at the time of the transfer on the following: Any part of the presumed sales price the consumer pays at that time, if the service in the contract is taxable at the combined general rate. The presumed sales price, if the service in the contract is not taxable at the combined general rate. The percentage of the presumed sales price that is equal to the percentage of the service in the contract that is not taxable at the combined general rate, if any part of the service in the contract is not taxable at the combined general rate. -(f). Repealed by Session Laws 2007-244, s. 3, effective October 1, 2007. History (1996, 2nd Ex. Sess., c. 13, s. 5.1; 2001-414, ss. 16, 17; 2006-151, s. 6; 2007-244, s. 3; 2016-5, s. 3.8(a).) Editor's Note. - Session Laws 1996, Second Extra Session, c. 13, s. 10.2(5), made this section effective on the earliest date practicable (November 1, 1996), and provides that the earliest date practicable is considered to be the first day of the third month following the ratification of the act (August 2, 1996). The act further provides that this section is applicable to sales made on or after the effective date. Session Laws 1996, Second Extra Session, c. 13, s. 1, provides that this act shall be known as the William S. Lee Quality Jobs and Business Expansion Act. Session Laws 1996, Second Extra Session, c. 13, s. 10.1, provides: "This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this act before its amendment or repeal; nor does it affect the right to any refund or credit of a tax that would otherwise have been available under the amended or repealed statute before its amendment or repeal." Effect of Amendments. - Session Laws 2006-151, s. 6, effective January 1, 2007, substituted "Tangible personal property bundled with service contract" for "Bundled transactions" in the section heading. Session Laws 2007-244, s. 3, effective October 1, 2007, substituted "sold below cost with conditional" for "bundled with" in the section heading; in the introductory language of subsection (a), substituted "Conditional Service Contract" for "Bundled Transaction" in the subsection catchline, and substituted "conditional service contract is a contract" for "bundled transaction is a transaction"; substituted "seller" for "service provider" in subdivision (a)(2); rewrote subdivision (a)(3) and subsection (b); and deleted former subsections (c) through (f). Session Laws 2016-5, s. 3.8(a), effective May 11, 2016, deleted "service" following "conditional" in the section heading, and throughout the section; in subsection (b), in the second sentence of the introductory language, inserted "at the general rate under G.S. 105-164.4(a) "; and added subdivision (3).