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North Carolina Budget Signed

As predicted, the Governor of North Carolina signed the budget. At about 4:30 on August 7, Governor Beverly Perdue signed the North Carolina budget, a budget that included the modernization of the nexus laws. As a result, out of state retailers who meet the sales threshold will be required to collect sales tax on sales to North Carolina residents just as if they had a brick and mortar store located in North Carolina. The sales threshold is $10,000 in total sales from all North Carolina affiliates or publishers to all North Carolina residents in the combined previous four quarters.

North Carolina has now become the third state to enact this legislation. As we wait to see the interpretation of this law I urge everyone to make educated business decisions. Contact and retain the services of a sales and use tax attorney in North Carolina. Does the law even impact you – do you meet the sales threshold? Contact the North Carolina Department of Revenue and ask for clarification on interpretation. Ask about the procedure for rebutting the presumption of nexus. Will the NY Two Step Solution work? (Remember the NY Two Step Solution includes including restrictions against soliciting for a merchant in terms and a yearly affidavit.) Or will North Carolina have an interpretation similar to Rhode Island which currently says you cannot rebut the presumption of nexus if you have affiliates/publishers in the state and meet the sales threshold.

I also urge everyone to keep professional and courteous. Merchants will need to make the decision that is right for their business and for that they cannot be faulted. The manner in which terminations happen will show if we have learned from the events and mistakes with New York affiliates. In some cases, these mistakes were repeated with Rhode Island affiliates.

Merchants, if you must terminate your relationship with North Carolina affiliates, please treat them with respect; give them as much notice as possible. Please make educated and informed decisions and don’t just react. Keep the lines of communication open.

Affiliates, if you receive termination letters please understand that merchants are making business decisions. You may not be happy with or agree with their decision but they are doing what they feel is best; hopefully it is an educated decision. Your responsibility will be to adapt. Identify replacement merchants and replace links; hopefully you are prepared and have replacements lined up and can just replace links. Remember, recovery is possible, it takes work, but there are thousands of merchants to choose from.

If we all work together and continue to communicate we can adapt and move forward.

The North Carolina Department of Revenue website is located here: http://www.dornc.com/index.html

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