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North Carolina Governor Bev Purdue has signed a budget bill that passes the Amazon provision related to nexus. This provision states that a retailer is presumed to be soliciting or transacting business in North Carolina 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. (S.B. 202, Laws 2009, effective as noted)


A bill that would enact a presumption of nexus for certain online retailers and extend the sales and use tax to digital products has been introduced in the North Carolina Senate on March 9, 2009. The legislation is basically identical to the Amazon law that was enacted by New York in 2008. A presumption that an online retailer is soliciting business in the state, for sales and use tax purposes, would be created if an in-state entity refers customers to the retailer by a link on a Web site in return for a commission or other consideration. As in New York law, the presumption under the North Carolina bill would only apply when the retailer’s cumulative gross receipts from sales to customers referred to the retailer by in-state entities exceed $10,000 in the preceding year. However, the presumption could be rebutted by proof that the in-state entity did not engage in any solicitation in the state on the retailer’s behalf that would meet the nexus requirement. The North Carolina legislation would also extend the general state sales and use tax rate to the sales price of an audio or audiovisual work, a book, and computer software that is delivered or accessed electronically and would be subject to sales and use taxes if sold in a tangible form. Further rules and regulations apply. (S.B. 487, introduced in the North Carolina Senate on March 9, 2009, and referred to the Senate Committee on Finance on March 10, 2009)


A North Carolina tax hearing found that a taxpayer who made sales to North Carolina residents had nexus in the state and was subject to tax. The taxpayer was not previously registered in North Carolina, but made sales that included installation and delivery with their own trucks to customers in North Carolina. The taxpayer claimed that they were not responsible for the tax because they were registered in another state. However, the tax hearing found the taxpayer’s activities in the state qualified them as a retailer in North Carolina, they were responsible for tax on the sales. (Secretary of Revenue Decision No. 2006-177, North Carolina Department of Revenue, January 16, 2007)


According to a 2004 North Carolina administrative decision, an out-of-state company that sold specialty automobile racing transmissions to North Carolina customers has established nexus due to its ownership of property stored in North Carolina. Transmissions that were sold to North Carolina customers were first shipped to instate transmission builders where modifications were made to suit each customer. The transmissions were then either retrieved by the customer at the in-state location or were shipped to the customer by the in-state transmission builder on behalf of the out-of-state corporation. (Administrative Decision No. 443, North Carolina Tax Review Board, June 2, 2004)


Recently, an out-of-state company who was sending catalogs to North Carolina for the purpose of advertising its videos and then filling orders placed by North Carolina residents was determined not to have established nexus in North Carolina due to the insubstantial nature of its activities. As result, the company was not required to pay sales or use tax on orders placed by North Carolina residents. (North Carolina Superior Court, Wake County, Nos. 00CVS14723 and 00CVS14724, February 20, 2003)



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