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North Carolina Affiliates Get Ready

Add North Carolina to the growing list of states working on legislation to enact an affiliate tax. North Carolina has a bill that closely mimics the New York tax. The bill numbers in North Carolina are Assembly House Bill 558 and Senate Bill S487.

A retailer is presumed to be soliciting or transacting
business by an independent contractor, agent, or other representative if the
retailer enters into an agreement with a resident of this State under which the
resident, for a commission or other consideration, directly or indirectly refers
potential customers, whether by a link on an Internet Web site or otherwise,
to the retailer, if the cumulative gross receipts from sales by the retailer to
purchasers in this State who are referred to the retailer by all residents with
this type of agreement with the retailer is in excess of ten thousand dollars
($10,000) during the preceding four quarterly periods. This presumption
may be rebutted by proof that the resident with whom the retailer has an
agreement did not engage in any solicitation in the State on behalf of the
seller that would satisfy the nexus requirement of the United States
Constitution during the four quarterly periods in question.

It is interesting to note that the short title of this bill is Modernize Sales Tax Stat/Digital Products.  The bill attempts to modernize the nexus definition and also tax download products. Both Houses sent the bills to their Finance Committees earlier this month.

Link to Senate Bill S487 and Link to House Bill 558

I am actually all for modernizing the tax law. In my opinion it is necessary to totally modernize and adopt the Streamlined Sales Tax. I think Federal action to force adoption and enactment is the best idea. The current system is just too complicated. The sharp increases in online  shopping make it necessary to move to a different system and Streamlined Sales Tax Project is the best and fairest answer.

{ 2 comments… add one }

  • Geno Prussakov March 26, 2009, 8:37 pm

    Snowball effect. :-(

  • Mark Welch April 1, 2009, 2:17 am

    Interesting that NC stuck with the $10,000 threehhold, unlike some other small states which are seeking a $2,000 threshhold. NY claims that just 30 companies are collecting tax because of its law; it’s hard to imagine that even a half-dozen of those would generate adequate affiliate-advertising-influenced sales to trigger NC’s law (assuming that NC interprets the law as NY has).

    In other words, NC’s law (and other small and mid-size states’ versions) might really be an “Amazon Tax” that affects NO other online retailers.

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