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North Carolina Dealers and Auto Finance Providers,


Many of you may be aware of the confusing bulletins being circulated in the industry regarding changes to the North Carolina Vehicle Service Contract Tax.  The bulletins and emails have led some to believe that the vehicle service contract tax is being repealed effective March 1, 2016.


Based on the NC Department of Revenue’s bulletin of Feburary 11 and latest clarification issued February 19, it is FNI’s opinion that for most used car dealer service contract programs, and especially those most common in the independent dealer market, the 2014 tax will continue, and no changes should be made to your tax collecting and remitting process.  


The legislation responsible for the confusion may act as a partial repeal of the 2014 tax, but only for vehicle service contracts that “COVER THE ENTIRE CAR” – and according to NC DOR, that means exclusionary coverage, rather than the kind of stated component contracts most common in the used car industry. The February 19 bulletin makes it clear that contracts that cover just “components” or “systems” but not the entire car are still subject to the tax. 


The national vehicle service contract industry association (SCIC) is still working with NC DOR for further clarification – under the current interpretation, dealers and finance companies will have to determine which contracts are subject to tax and which are not, and the very loose definition provided by DOR creates uncertainty for making those determinations, and creates a high risk of improperly assessing or neglecting the tax. The SCIC reports that new legislation is expected in NC this year to provide further clarification as well.


A law passed in the NC General Assembly delaying mandatory participation in the electronic lien system until July 1, 2016.  We are evaluating service providers in order to be able to make the best informed recommendations we can, so please be patient!  There are still some questions I am trying to get answered.

NCDMV & NCDENR Receive Approval of State ImplementationPlan for Inspection and Maintenance Program

RALEIGH — The North Carolina Division of Motor Vehicles, in conjunction with the North Carolina Department of Environment and Natural Resources, has received the Environmental Protection Agencies approval for a new State Implementation Plan. In accordance with Session Law 2012-199 / House Bill 585 (HB 585), the state will debut a new emissions exemption pertaining to the North Carolina Inspection and Maintenance program.

[“We look forward
to our continued partnership and teamwork with the Department of Environment
and Natural Resources and State Inspection stations, as we roll out this
exemption,” said NCDMV Commissioner Kelly Thomas. “Aiding in the improvement of
air quality, while decreasing the carbon footprint of our motorists is a goal
that all agencies share.”]

Effective Wednesday, April 1, 2015, vehicles produced within three years of the current year and have less than 70,000 miles on its odometer are exempt from obtaining an emission inspection.

[“Our most recent
research showed that North Carolina could exempt newer vehicles from emissions
tests without making our air unhealthy to breathe,” DAQ Director Sheila Holman
said. “Newer cars and trucks seldom fail
the emissions tests during their first three model years.”]

A vehicles age is determined by its model year, which is prominently displayed on the owner’s valid registration and the automobile emissions control label located in the engine compartment. All vehicles are still subject to the annual safety inspection.

For more information about the North Carolina Inspection Program or to determine which inspection is required for your vehicle, please visit the Division’s website at