North Carolina Auto Body Shops Now Have to Charge Labor Tax

North Carolina Auto Body Shops Now Have to Charge Labor Tax

Tax rate of 6.75 percent on all labor could lead to more total losses and higher insurance premiums.

North Carolina body shops, tire and automotive service companies had to start charging tax on labor/service beginning March 1st due to the state making an adjustment on how tax revenues are collected, switching more to a “user tax.”

The tax rate is 6.75 percent on all labor, and one North Carolina body shop owner believes it will probably lead to two things: more total losses and higher insurance premiums.

“I don’t know how much tax that would be, but in some cases, it could very likely total a vehicle in North Carolina because we have a 75 percent threshold,” says Ronnie Pack, owner of Pack Brothers Collision Center in Belmont. “If you have a couple hundred dollars there, it might push one right over the top.”

Unlike a tire store or automotive service shop, where the tax will have to be paid by the consumer, the tax on the collision side will be paid by the insurance company unless the consumer is paying out of pocket. This is why Pack expects premiums to increase.

“Because the first thing that is going to happen, and you can bet this will go down in 90 days, is [the insurers] will hit the insurance commissioner up for a raise because they’ll be losing money due to the excess taxes,” Pack says. “And they will ask for 7 to 9 percent and get about 3, which is what they wanted to start with.”

“It’s just another way for the state to get some money out of everybody. It will mean a lot of money for the state, but you know how that goes – in a couple years, they will just go, ‘Well, we need some more, we’re out of money.'”

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