image source: flickr no changes
Prior to June 1, 2014, when someone rented their personal residence for fewer than 15 days during a year, the rent was not subject to sales tax and any local accommodation tax. This coincides nicely with a federal tax law exempting rental income for fewer than 15 days from income tax. The federal rule is often called the “Masters rule” as people around Augusta, GA have used it for years during the Masters golf tournament. They will rent their homes to visitors for two weeks at exorbitant prices and owe no income tax on the rent.
Apparently, the NC Legislature could not control itself when it saw the U.S. Open and the U.S. Women’s Open were coming to NC this June and had to pass a bill making the rental income for fewer than 15 days subject to sales tax and any local occupancy tax (Moore County where Pinehurst is located has an occupancy tax). The tax only applies if the owner uses a real estate agent or real estate broker to handle the rental. So everyone renting through a real estate agent or broker in Moore County will see their rental go up by a total of 9.75%. The rate is made up of the 4.75% state sales tax rate, the 2% local sales tax rate and the 3% local occupancy tax rate.
But wait, the Legislature sprung this on us at the last minute. House Bill 1050 was passed and signed into law on May 29, 2014 and is effective June 1, 2014. Giving our real estate agents and brokers a whopping two days notice. One of those two days was a Saturday but perhaps that is not so bad since most real estate agents and brokers work the weekend.
Let’s see, the Legislature raises taxes and gives us two whole days to get ready for them. I bet there will be some unhappy U.S. Open visitors this year.
In case you were wondering, this new NC rule applies throughout the state. The NC Department of Revenue has a notice (PDF) about it.