Online Sales Tax Effort Crashes in North Carolina

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By Andrew M. Ballard

North Carolina’s effort to capture lost revenue from remote sales has been put on hold—at least temporarily.

The Legislature adjourned June 30 without enacting a bill ( S.B. 81) that would have required retailers with gross sales in excess of $100,000 or 200 or more separate transactions during the previous year to collect and remit sales taxes beginning Jan. 1. The Senate passed the bill June 13, but it was sent to a House committee where it sat when the session ended.

However, lawmakers will return Aug. 3 to consider gubernatorial vetoes and legislation that is being negotiated by legislative conferees. Among those latter measures is a bill ( S.B. 628) that includes a number of tax changes—and there is a remote possibility that the online tax provisions could be inserted in that legislation.

In addition to requiring larger online retailers to collect and remit taxes, S.B. 81 also would have required marketplace providers like Inc. and eBay Inc. to file a return and remit sales or use taxes for all sales they facilitate in North Carolina, unless a retailer registered in the state does so. That requirement would have taken effect July 1, 2019. The bill also included provisions related to online accommodation rentals.

William W. Nelson, a Raleigh-based tax partner with Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP, told Bloomberg BNA that S.B. 81 provisions “could conceivably be inserted into the conference report” on S.B. 628. However, Nelson said he was unaware of any plans to do so.

Nelson said that he didn’t see any advantage to having the online sales tax provisions “on the books” were the U.S. Supreme Court to reverse its 1992 decision in Quill Corp. v. North Dakota, which prohibits states from imposing sales and use tax collection obligations on vendors without an in-state physical presence. In fact, he said, S.B. 81 as written could have potentially created an exempt class with its income and transaction thresholds were the high court to make such a ruling.

Awaiting Sourcing

The Legislature upon adjournment scheduled two special short sessions for later in the year. Those sessions, set for Aug. 3 and Sept. 6., are limited to veto considerations, action on bills pending before conferees and other narrow issues.

During this year’s regular session, lawmakers approved a budget bill ( S.B. 257) that continued a series of corporate and personal income tax cuts that the Legislature enacted in recent years. The new budget law also increased the standard deduction. However, other widely discussed provisions to the tax code weren’t enacted.

In addition to the online sales tax measure, among the most notable tax changes that weren’t approved during the regular session was the adoption of market-based sourcing for apportioning receipts from services and intangibles, according to William W. Nelson, a Raleigh-based tax partner with Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP.

Because the market-based sourcing bill fell short, Nelson said multistate taxpayers still will use the income-producing activities method of sourcing receipts. Such means will be used even though North Carolina will shift to single-sales factor apportionment in 2018, a change being phased in through a 2015 state law, he told Bloomberg BNA.

The online sales tax and market-based sourcing issues are likely to remain on the radar in North Carolina, Nelson told Bloomberg BNA.

To contact the reporter on this story: Andrew M. Ballard in Raleigh, N.C. at

To contact the editor responsible for this story: Ryan C. Tuck at

For More Information

Text of S.B. 81 is available at

The different versions of S.B. 628 are at

Text of S.B. 257 is at

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