2019 Year-End Legislative Update
Senate Bill 483 “Vacation Rental Act Changes,” was signed into law in July. The legislation reiterates that properties covered by the Vacation Rental Act are subject to the statutes governing a local government’s ability to enact or enforce ordinances requiring registration of rentals and various inspections. While this has been a commonly held assumption for many years, the legislation’s sponsors felt a clarification in the statute was necessary to protect against municipal over-regulation.
Senate Bill 557, “Various Finance Law Changes,” was enacted in November and included changes to the way property managers of short-term rentals must operate. This legislation defines “accommodation facilitators” as:
“A person that contracts, either directly or indirectly, with a provider of an accommodation to perform, either directly or indirectly, one or more of the activities listed in this subdivision. The term includes a real estate broker as defined in G.S. 93A-2.”
The activities are:
a. “Market the accommodation and accept payment or collect credit card or other payment information for the rental of the accommodation; or
b. List the accommodation for rental on a forum, platform, or other application for a fee or other consideration.”
These facilitators must continue to remit the required taxes to the NC Department of Revenue. They would also need to file new annual reports providing the property owner’s name, the property owner’s mailing address, the physical location of the accommodation, and gross receipts information for the rentals. NC REALTORS® opposed the new reporting requirements due to concerns about the data being used to negate due process by the Department and to supersede the prohibition on rental registration. Though these provisions become law in February 2020, we have yet to receive formal guidance from the Department of Revenue regarding the new required filings. NC REALTORS® lobbyists continue to have conversations with legislators about additional changes to the legislation and hope to see those move forward in 2020.
Finally, legislators approved Senate Bill 523 “Revenue Laws Clarifying & Administrative Changes” in July. This legislation addressed updates to the state’s revenue statutes, including language related to tax collection. It eliminates language that gives the Department authority to assess retailers for sales and use taxes in certain situations regardless of the retailer’s liability for sales tax under-collection related to certain RMI (repair, maintenance, and installation tax), real property contract, and service contract transactions. It also clarifies the conditions under which the taxpayer is entitled to relief with respect to the under collection of tax for linen rentals. Finally, the legislation improves the overall statutory references to RMI taxes.
Managing real property is not a taxable service under current law. Through the clarifications, RMI services provided by a real property manager under a property management contract are subject to sales and use tax if more than 25% of the time spent managing the property for the billing or invoice period is attributable to taxable RMI services. Certain RMI services provided by a real property manager under a property management contract are excluded from taxation, and from the 25% calculation. These changes took immediate effect; though additional guidance is needed from the Department of Revenue.
Legislators will return to complete the work of the 2019 long session in January before taking a break for the primary elections in advance of the short session convening in May.
