North Carolina Expands Applicability of Sales Tax to Digital Property

Effective October 1, 2019, North Carolina enacted legislation that expands the applicability of sales tax to digital property. The legislation eliminates the requirement that digital property must have a taxable, tangible corollary in order to be subject to tax. The legislation removes the phrase that an item “would be taxable…if sold in a tangible medium.” By removing this phrase, the legislation attempts to clear up confusion regarding sales of digital property that fall under one of the categories below but do not necessarily have a tangible corollary. The types of digital property that are subject to tax are:

• Audio works
• Audiovisual works
• A book, magazine, a newspaper, a newsletter, a report, or another publication
• A photograph or greeting card

(S.B. 523 (Session Law 2019-169)

UPDATE: Effective retroactively to October 1, 2019, North Carolina has enacted sales and use tax exemptions for certain digital goods. Read our news item for more information.