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The North Carolina Department of Revenue has issued a notice announcing the state sales and use tax rate has been increased from 5.5% to 5.75%, effective October 1, 2009. Local rates, however, decrease from 2.25% to 2% in all counties except Alexander, Catawba, Cumberland, Haywood, Martin, Pitt, Sampson, and Surry where the county rate decreases from 2.5% to 2.25%. Mecklenburg County continues to impose an additional 0.5% Transit rate. The third one-half cent local tax, previously reduced to 0.25% under Article 44, will decrease to zero. The combined State and local rate will continue to be 7.75% in ninety-one counties, 8% in Alexander, Catawba, Cumberland, Haywood, Martin, Pitt, Sampson, and Surry Counties and 8.25% in Mecklenburg County. For purposes of determining the applicable rate of tax, a sale is considered to be consummated when the item is delivered to the purchaser. Therefore, the rate of tax due is generally the rate in effect when delivery of property occurs. (Important Notice 10-09, North Carolina Department of Revenue, October 2009)


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)


North Carolina Governor Bev Perdue has signed a budget that temporarily increases the general state sales and use tax rate from 4.5% to 5.5%. The 1% increase will be applicable to sales made on or after September 1, 2009 and before July 1, 2011. (S.B. 202, Laws 2009, effective as noted)


A North Carolina trial court incorrectly applied a de novo standard of review to overturn the Tax Review Board and Assistant Secretary of Revenue’s determination that a taxpayer was not a charitable organization, and therefore was not entitled to a sales and use tax refund. The decision reached by the trial court was based on its independent fact-finding done during the review of the agency’s decision, which is inconsistent with the applicable standard of review and is a misapplication of governing law. Since the trial court did not have the authority to disregard or supplement the administrative agency’s factual determinations, its application of a de novo standard of review was erroneous and necessitates remand for further proceedings in the lower court. (In the Matter of: The Denial of NC Idea’s Refund of Sales and Use Tax for the Period January 1, 2003 through June 30, 2003 by the Secretary of Revenue of North Carolina, North Carolina Court of Appeals, No. COA08-561, April 21, 2009)


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)



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