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On February 5, 2014, North Carolina launched the Trust Tax Recovery Program, which offers amnesty to qualifying companies owing collected but unpaid trust taxes.  The North Carolina Department of Revenue describes trust taxes as those taxes paid by a customer to a seller or withheld from an employee, and held in trust by the business until filed and paid to the Department. The program will offer penalty and fee waivers, as well as payment plans to companies that have liabilities for sales, withholding and other trust taxes. Businesses that file and pay all outstanding taxes within the payment plan terms may have their penalties and collection fees waived. If program participants fail to file or pay future taxes as required, fees and penalties may be reinstated. Participants in the program must not be facing criminal charges or be the subject of a criminal investigation at the time of application. Taxpayers may not receive the benefits of the program for tax periods associated with a prior criminal conviction. Taxpayers may not participate in the program if they have defaulted on payments or received penalty waivers while participating in the Small Business Taxpayer Recovery Program or the Small Business Counseling Program. Click here for more information.


The North Carolina Department of Revenue has reminded taxpayers that the state’s annual sales tax holiday formerly scheduled in August was repealed by legislation enacted in 2013. The sales tax holiday had applied to sales of clothing, school supplies, computers and sports and recreational equipment. The department advises that any retailer who, by any character or public advertisement, offers to absorb the sales and use tax, or in any manner directly or indirectly advertises that the tax is not considered an element in the price to the purchaser, is guilty of a Class 1 misdemeanor. (Important Notice: August Sales Tax Holiday Repealed, North Carolina Department of Revenue)


The Streamlined Sales and Use Tax (SST) Governing Board has  issued a best practices matrix which provides answers to whether the state follows the best practices set forth in the SST Agreement regarding deal-of-the-day vouchers. All SST Member states are to complete and publish their position on the best practices.  The matrix outlines if the “best practiceas approved by the Streamlined Sales Tax Governing Board (SSTGB) for each of the products, procedures, services, or transactions identified in the chartis followed by the specific state. The following best practice descriptions are listed in the matrix along with whether the state follows the best practice:


1.       The member state administers the difference between the value of a voucher allowed by the seller and the amount the purchaser paid for the voucher as a discount that is not included in the sales price (i.e., same treatment as a seller’s in-store coupon), provided the seller is not reimbursed by a third party, in money or otherwise, for some or all of that difference.

2.       The member state provides that when the discount on a voucher will be fully reimbursed by a third party the seller is to use the face value of the voucher (i.e., same as the treatment of a manufacturer's coupon) and not the price paid by the purchaser as the measure (sales price) that is subject to tax.

3.       The member state provides that costs and expenses of the seller are not deductible from the sales price and are included in the measure (sales price) that is subject to tax. Further, reductions in the amount of consideration received by the seller from the third party that issued, marketed, or distributed the vouchers, such as advertising or marketing expenses, are costs or expenses of the seller.


Unless otherwise listed below, the SST member states have published the Best Practices Matrix and follow the three best practices listed above.


The following SST member states have issued the matrix but don’t follow some or all of the best practices listed above as of April 2014: Georgia, Kansas, Nebraska, New Jersey, and Ohio.


The following SST member states have not yet issued the matrix as of April 2014: Tennessee, Utah, Vermont, and Wyoming.  Copies of the matrix can be found on each specific state information page on the SST Web page at


North Carolina has provided guidance regarding the sourcing for certain digital property subject to sales and use tax.  The following digital property is subject to tax:  an audio work; an audiovisual work; a book, magazine, newspaper, newsletter, report, or other publication; and a photograph or a greeting card. The general sales and use tax rate applies to digital property that is delivered or accessed electronically even though it is not considered tangible personal property, and would be taxable under the sales and use tax if sold in a tangible medium. A purchaser receives digital property when the purchaser takes possession of the property or makes first use of the property, whichever comes first.  Sales of digital property are sourced as follows:


  1. When a purchaser receives digital property at a business location of the seller, the sale is sourced to that business location.
  2. When a purchaser or purchaser’s donee receives digital property at a location specified by the purchaser and the location is not a business location of the seller, the sale is sourced to the location where the purchaser or purchaser’s donee receives the product.
  3. When the two scenarios above don’t apply, the sale of digital property is sourced to the location indicated by an address for the purchaser that is available from the business records of the seller that are maintained in the ordinary course of the seller’s business when use of this address does not constitute bad faith.
  4. When the three scenarios above don’t apply, the sale of digital property is sourced to the location indicated by an address for the purchaser obtained during the consummation of the sale, including the address of a purchaser’s payment instrument, if no other address is available, which use of this address does not constitute bad faith.
  5. When the four scenarios above don’t apply, including the circumstance in which the seller is without sufficient information to apply the rules, the location will be determined based on the address from which the digital good was first available for transmission by the seller.


The tax applies regardless of whether the purchaser of the item has the right to use it permanently or to use it without making continued payments. (Important Notice: Sourcing for Certain Digital Property Subject to Sales and Use Tax, North Carolina Department of Revenue, August 2013)


Representative Lamar Smith (Republican, Texas) has introduced a bill to bar multiple taxes on digital goods and services.  Smith had proposed an earlier bill which failed to pass.  This bill is a revised version of the earlier bill. The proposed bill – called the Digital Goods and Services Tax Fairness Act of 2013 – would only allow a state to tax sales of digital goods and services to customers with a tax address within that state. Additionally, states would be barred from imposing multiple taxes on digital goods. The bill defines digital goods as sounds, images, data and facts maintained in digital form. Internet access service is not included as a digital good in the bill. (H.R. 3724)



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