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North Carolina Internet Sales Tax Moments Away

Yesterday while I traveling back from Albany there were the anticipated actions in North Carolina regarding the Internet sales tax. As I expected, both the Senate and the House of Representatives accepted the report from the joint budget conference. The Budget will now come up for vote in both houses. It is expected to pass. The budget includes the Internet sales tax or advertising tax. The tax provision also has the overwhelming support of the Governor and the Secretary of Revenue. As a result of all the support, the law will be in effect very soon; the budget is overdue and the Governor will likely sign immediately.

It is expected that North Carolina, like Rhode Island, will also have a strict interpretation of the nexus definition. North Carolina can expect terminations from more merchants as word of  new nexus definition spreads. As I understand it, the law will become effective immediately upon signing. Merchants will need to take immediate action for it to have any effect. The sales threshold is $10,000 in total sales from all North Carolina affiliates to North Carolina residents in the previous four quarters. There seems to be no apparent ability to rebut; if you have NC affiliates and the sales threshold is met nexus is established.  Remember, as I have always said,  please seek professional advice, I am not a lawyer or accountant and only provide my opinions and thoughts. 

The pending legislation from the budget ( NC Budget look around page 219)

The retailer has representatives in this State who solicit business or transact business on behalf of the retailer, solicits or transacts business in this State by employees, independent contractors, agents, or other representatives, whether the mail order remote sales thus subject to taxation by this State result from or are related in any other way to such the solicitation or transaction of business. 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. This presumption applies only 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

Affiliate Voice has been following and working on the North Carolina issue since early March and our work does not end with passage. Our work is far from over, in fact now comes the tough part – adapting.

{ 4 comments… add one }

  • Tom Davies August 5, 2009, 11:11 am

    Since the text is identical to NY and contains this statement doesn’t it seem there could be a similar NY-style solution? “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”

  • Melanie August 5, 2009, 12:40 pm

    The laws are all similar but interpretation is what matters. In Rhode Island for example, (similar law) they have said if a merchant has RI people getting commission for sales in state they are soliciting sales -this is direct from the tax revenue department to me. There is no apparent ability to rebut there. Affiliates/independent contractors/publishers/commission based program managers all equal nexus because getting commissions from in-state sales means solicitation occured.

    Based on the comments made by several NC officials it seems like they will also have the strict interpretation. The back up plan in NC was for the Scretary of Revenue to simply enforce current legislation in which would have impacted even more merchants. At least as part of the budget there is a sales threshold.

    I would hope there is a NY type solution and we’re looking into this. I just want everyone to be prepared because as we learned in RI, same law but interpretation will vary. Affiliates need to realize what may happen.

    Thanks for taking the time to comment Tom. We’ll keep working on solutions!

  • TJ August 7, 2009, 7:50 pm

    NC State Officials Have Dumped the Baby Out with the Bathwater!

    As an (soon to be ex) Affiliate Marketer in NC what is it we can do at this juncture to combat/reverse this bill. It is completely bewildering that NC state officials would pass such a law knowing it means the cancellation of affiliate programs in NC. Not the smartest move if you’re trying to ‘increase’ tax revenue and especially during such economically rough times.

    Seems their ‘solution’ has magnified the problem.

  • larry August 20, 2012, 6:01 am

    seems to me it’s just another means of shoving laws down our throats just as obama has done to move us even closer to becoming a socialist governmentn

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