(a) Conditional Contract Defined.--A conditional contract is a contract in which all
of the following conditions are met:
(1) A seller transfers an item of tangible personal property to a consumer on the
condition that the consumer enter into an agreement to purchase services on an ongoing
basis for a minimum period of at least six months.
(2) The agreement requires the consumer to pay a cancellation fee to the seller if
the consumer cancels the contract for services within the minimum period.
(3) For the item transferred, the seller charges the consumer a price that, after
any price reduction the seller gives the consumer, is below the purchase price the
seller paid for the item. The seller's purchase price is presumed to be no greater than the price the seller
paid, as shown on the seller's purchase invoice, for the same item within 12 months
before the seller entered into the conditional contract.
(b) Tax.--If a seller transfers an item of tangible personal property as part of a
conditional contract, a sale has occurred. The sales price of the item is presumed to be the retail price at which the item
would sell in the absence of the conditional contract. Sales tax at the general rate under G.S. 105-164.4(a) is due at the time of the transfer on the following:
(1) Any part of the presumed sales price the consumer pays at that time, if the service
in the contract is taxable at the combined general rate.
(2) The presumed sales price, if the service in the contract is not taxable at the
combined general rate.
(3) The percentage of the presumed sales price that is equal to the percentage of
the service in the contract that is not taxable at the combined general rate, if any
part of the service in the contract is not taxable at the combined general rate.
(c)-(f) Repealed by Session Laws 2007-244, s. 3, effective October 1, 2007.
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