North Carolina Enacts Marketplace Nexus Legislation

Effective February 1, 2020, North Carolina has enacted marketplace nexus legislation. The marketplace nexus provisions apply to marketplace facilitators that makes sales, including all marketplace facilitated sales for all marketplace sellers, sourced to North Carolina for the previous or the current calendar year that meet either of the following criteria:

• Have gross sales in excess of $100,000, or
• Have 200 or more separate transactions

A marketplace facilitator that meets either of the above thresholds is considered the retailer of each marketplace-facilitated sale it makes and is liable for collecting and remitting North Carolina sales and use tax on all such sales. A marketplace facilitator is required to comply with the same requirements and procedures as all other retailers who are required to be registered to collect and remit sales and use tax in North Carolina.

A marketplace facilitator is required to collect and remit sales tax regardless of whether a marketplace seller for whom it makes a marketplace-facilitated sale meets any of the following criteria:

• Has a physical presence in North Carolina
• Is required to be registered to collect and remit sales and use tax in North Carolina
• Would have been required to collect and remit sales and use tax in North Carolina if the sale had not been made through a marketplace
• Would not have been required to collect and remit sales and use tax in North Carolina had the sale not been made through a marketplace

A marketplace facilitator must provide or make available to each marketplace seller the following information with respect to marketplace-facilitated sales that are made on behalf of the marketplace seller and that are sourced to North Carolina:

• Gross sales
• The number of separate transactions

The information can be provided in any format and should be provided or made available no later than 10 days after the end of each calendar month.

The Department of Revenue will not assess a marketplace facilitator for failure to collect the correct amount of tax due if the marketplace facilitator can demonstrate to the Secretary’s satisfaction that all of the circumstances listed below apply:

• The failure to collect the correct amount of tax was due to incorrect information given to the marketplace facilitator by the marketplace seller.
• The marketplace facilitator did not receive specific written advice from the Secretary for the transaction at issue.

This liability relief does not apply with regard to a marketplace-facilitated sale for which the marketplace facilitator is the marketplace seller or if the marketplace facilitator and the marketplace seller are affiliates. If a marketplace facilitator is not assessed for the tax due, the marketplace seller is liable for the tax due provided the marketplace seller is engaged in business in North Carolina.

The legislation also provides that no class action lawsuits may be brought against a marketplace facilitator in any North Carolina court on behalf of customers arising from or in any way related to an overpayment of sales or use tax collected on facilitated sales by a marketplace facilitator, regardless of whether that claim is characterized as a tax refund claim.

Per the legislation, a “marketplace facilitator” is a person that, directly or indirectly and whether through one or more affiliates, does both of the following:

• Lists or otherwise makes available for sale a marketplace seller’s items through a marketplace owned or operated by the marketplace facilitator
• Does one or more of the following:
  • Collects the sales price or purchase price of a marketplace seller’s items or otherwise processes payment.
  • Makes payment processing services available to purchasers for the sale of a marketplace seller’s items.

A “marketplace seller” is a person that sells or offers to sell items through a marketplace regardless of any of the following:

• Whether the person has a physical presence in North Carolina
• Whether the person is registered as a retailer in North Carolina
• Whether the person would have been required to collect and remit sales and use tax had the sales not been made through a marketplace.
• Whether the person would not have been required to collect and remit sales and use tax had the sales not been made through a marketplace.

(Ch. 2019-246 (S.B. 557), Laws 2019, effective February 1, 2020)

UPDATE: North Carolina has enacted legislation, effective July 1, 2020, that removes the nexus economic nexus threshold for purposes of the state’s marketplace nexus provisions. The legislation states that a marketplace facilitator engaged in business in North Carolina is considered the retailer of each marketplace-facilitated sale it makes and is liable for collecting and remitting sales and use tax on all such sales. Read our updated news item for more details.