As I understand  from the  following  ( from NC DOR ) -->https://files.nc.gov/ncdor/documents/files/e589ci_7-18_webfill.pdf

this is just a statement of a contract between the contractor and you  that this capital improvement is subject to sales/use tax.  I am assuming that you are handling this outside of your  State  return filing ( or you have to include this  as the use tax liability if  if it has not been taxed as such ).  This has no impact on the federal return.

Is this what you meant or ?

Its sort of what I meant.  I now (thanks to you:) am beginning to understand that I must pay state tax on this (we have not as yet because the contractor stated it was a 'tax free' sale due to the form E-589CI)...  We want to pay the proper amount of taxes, and I need to know if we must pay taxes on both the labor and the supplies.  Thank you so much.