North Carolina Enacts Affiliate Nexus Presumption for Nonresident Retailers

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

By Steven Roll

Under omnibus budget legislation enacted by North Carolina, an out-of-state retailer is presumed to be transacting business in the state and, thus, subject to sales tax collection requirements if it makes more than $10,000 in annual sales from affiliate agreements with in-state residents. [S.B. 202, enacted 8/7/09]

However, S.B. 202 also specifies that a nonresident retailer will not trigger nexus in the state solely by purchasing advertising to be delivered via a broadcast medium such as television, radio, or the internet.

The so-called “Amazon” provision applies when an out-of-state retailer enters into an agreement with a North Carolina resident who refers customers to the retailer in exchange for a commission or other consideration.

S.B. 202 specifies that the presumption applies to referrals made via website links or otherwise.

$10,000 Annual Threshold

An out-of-state retailer must make in excess of $10,000 during the preceding four quarterly periods to become subject to the presumption under the legislation.

The legislation states that a retailer may rebut the nexus presumption by proving that the resident with whom it executed an agreement did not solicit customers on its behalf in a manner that would satisfy the nexus requirement of the U.S. Constitution during the four quarterly periods in question.

“A nonresident retailer who purchases advertising to be delivered by television, by radio, in print, on the Internet, or by any other medium is not considered to be engaged in business in this State based solely on the purchase of the advertising,” the bill states..

The legislation took effect July 1.

The full text of the measure is available at