More sales tax for mobile home buyers

By Scott Mooneyham | Jan 07, 2014


RALEIGH -- Now into the new tax year, state legislators are hearing another round of complaints about their tax changes, these involving how mobile and modular homes are taxed.


On New Year's Day, the cost of mobile and modular homes jumped as the state began applying the full state portion of the sales tax, 4.75 percent, to their purchase.


In the past, most buyers of a single-wide mobile home paid sales taxes capped at $300. Double-wide mobile home taxes were capped at $600, while buyers of modular homes paid 2.75 percent with no cap.


For a $25,000 single-wide mobile home, the sales tax rose from $300 to $1,187.50; for a $50,000 double-wide, the tax jumped from $600 to $2,375; and for a $75,000 modular home, the tax rose from $2,065.50 to $3,562.50.


Some dealers of the homes have complained that the difference in the price could mean whether buyers qualify for financing to buy the homes. Industry officials also point out that sales have already been dropping for years.


The legislators that pushed for the change, part of a larger tax overhaul, answer that it is all about simplification and fairness.


Rep. David Lewis, a Harnett County Republican who was the chief architect of the state House plan to overhaul taxes, pointed out to The Fayetteville Observer that the tax puts mobile homes on a more equal footing with site-built homes.


Lewis noted that homebuilders pay the full state and local sales tax -- 6.75 percent in most counties but as high as 7.25 percent in some -- on building materials, costs that are then passed on to buyers.


In the example that he provided, a site-built home sold for $75,000 would have materials costing about $45,000. The 7-percent state and local sales tax charged in Cumberland County would raise the costs by $3,150.


"Treating the same thing the same way was just a very important goal of ours," Lewis said.


But as even Lewis acknowledged, the two are not treated exactly the same.


While the full state and local sales taxes are charged for building materials for site-built homes, it is the builder who ultimately decides how that tax is passed on to the buyer.


Although only the state portion of the sales tax applies to the purchases of mobile and modular homes, that portion of the tax is applied to the full purchase price, not only the materials.


It also might be interesting to see how homebuilders are treating sales taxes paid on materials for federal tax purposes.


Maybe that is quibbling, and that Lewis' point is that applying a fuller rate to mobile homes and eliminating a cap is the best that lawmakers could do when it comes to "fairness."


Funny thing about tax fairness, though.


Trying to applying it seems to stir up a hornets nest here, and a hornets nest there. Last summer, the less the buzzing, the more likely the nest got hit.