WRAL Investigates

Lawmaker wants to close Lowe's sales-tax loophole

Posted February 13, 2009
Updated March 9, 2009

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— A powerful North Carolina lawmaker said Friday that the General Assembly needs to clarify the state tax code so that Lowe's Cos. will have to collect sales tax on goods the retailer's crews install in customers' homes.

Mooresville-based Lowe's doesn't charge sales tax on items like windows, carpeting, tile, cabinets, counter tops and appliances that store contractors install. Customers pay the tax only when they buy the goods at a Lowe's store for a do-it-yourself project.

Lowe's merchandise State losing revenue over sales tax issue

Lowe's officials said they were following the state law on contractor performance agreements.

The law states that contractors like plumbers and furnace repairmen pay what's commonly called a "use tax" for products used in repair projects and then roll that cost into the final bill, which doesn't include an itemized sales tax charge. Because most contractors get wholesale discounts, the use tax they pay wouldn't reflect any retail mark-ups that would be included in the price on which a do-it-yourselfer’s sales tax would be calculated.

Senate Majority Leader Tony Rand said Friday that contractor performance agreements were never meant to apply to retailers like Lowe's.

"That's certainly not the intent of the law," said Rand, a Cumberland County Democrat.

Use taxes likely bring in millions of dollars less to North Carolina's coffers than retail sales taxes would – revenue that is sorely needed as the state faces a $2 billion budget deficit.

"The state's losing revenue, in my opinion, and we certainly can't afford for that to happen. We need to get that straight," Rand said.

Lowe's competitors, from Home Depot Inc. to local home-improvement stores, charge sales tax on materials regardless of whether their crews install the goods for customers.

"We want (customers) to know what it is, and actually, I feel like we're accountable for how we do business," said Glen Anderson, general manager of Carpet One in Fayetteville.

Anderson and other home improvement dealers said Lowe's promise of no sales tax on installed items gives the chain a competitive advantage. Anderson said he wonders whether Lowe's customers understand they're still footing the bill for some tax, even though it's not shown on the receipt.

"I'd just say it's misleading," he said of the "no sales tax" promise. "I feel like we need to be playing by the same rules and being held accountable the same way."

The state Department of Revenue won't discuss the issue, citing taxpayer confidentiality. An official said in a statement that the agency is working to ensure "all North Carolina businesses meet their tax responsibilities and pay their fair share."

Sources told WRAL News the department has been in a long-running dispute with Lowe's over the company's reading of the law. The disagreement could lead to litigation.

Rand said lawmakers need to clarify the tax code to prevent further misinterpretations.

"They're trying to find the niche and trying to find a little better mouse trap, but we didn't mean for that mouse trap to be open. So, we'll see if we can't make sure it's closed," he said.


This story is closed for comments.

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  • morettiroofing Feb 16, 2009

    Lowe's HIW is a very bad company !

  • geosol Feb 13, 2009

    Hmmmmm.... looks like prices at Lowes will be going up soon. Dang nice try though!!

  • WRALSUCKS Feb 13, 2009

    "they'll tax the pennies on your eyes"

  • james27613 Feb 13, 2009

    the real proptety (doors, counter tops, carpet, pergo, etc) purchased at retail is subject to sales tax, not a use tax, as Lowe's claims.

    If I hire a plumber to r/r my water heater, he buys the heater from the supply house (or Lowe's or Home Depot) and paus the wholesale price, then a use tax is collected. If he pays retail then sales tax is collected.

    If the poster that saved $ 300 on tax can check his itemized receipt, I will bet money that there in NOT A LINE for USE TAX and an amount collected.

    No doubt this will end up in the courts.

  • BULLDOZER Feb 13, 2009

    Go get that nickel you tax man. There's never enough money. Always looking for one more penny.

  • uncbabie Feb 13, 2009

    This doesn't make sense. As a business owner, if you buy my product and I deliver it, I have to charge you tax on the product and delivery.

  • Marc3939 Feb 13, 2009

    "This "loophole" saved us about $300 on that purchase and installation."

    Must be nice to be able to spend over $4,000 on your countertops. I'm not surprised with someone with that type of money doesn't like to pay taxes. Please tell me what you're gladly willing to pay taxes on? I mean we all know those Corian countertops are a necessity.*rolls eyes*

  • anne53ozzy Feb 13, 2009

    I am curious to know if the cost of the installation by lowes is competative w local contractors or if you are paying more for their install than for that of independents. Secondly, and I know from my sister's experience w Lowes and appliances....How sound is the warranty on their installs? I would like to hear from more people who have had this installation done by Lowes....Ane do you have to pre pay for install?

  • meh2 Feb 13, 2009

    I hope they can collect the taxes, and many others as well - based on at least one comment here the education system could use a lot of work.

  • Adelinthe Feb 13, 2009

    Lowe's was smart; the lawmakers who allowed this loophole were the dumb ones.


    God bless.

    Rev. RB