North Carolina Imposes Economic Nexus Threshold

Effective Date: November 1, 2018

Threshold: $100,000 or 200 or more separate transactions

Measurement Date: Previous or current calendar year

Includable Transactions: Gross sales; Marketplace sales included towards the threshold for individual sellers

When You Need to Register Once You Exceed the Threshold: Next transaction (Update based on the 2021 SST Disclosed Practice 8 submitted by the state; this has changed from 60 days to next transaction)

Following the Supreme Court’s decision in South Dakota v. Wayfair, the North Carolina Department of Revenue published a policy directive on sales and use collection for remote sellers on August 7, 2018. The Department’s policy requires remote sellers to register and collect sales tax if the sellers have gross sales in excess of $100,000 or 200 or more separate transactions sourced to North Carolina in the previous or current calendar year. The policy is effective November 1, 2018 or 60 days after a remote seller meets the threshold, whichever is later. The Department will apply the policy on a prospective basis for remote sellers that lack a physical presence with North Carolina and are not registered to collect sales and use tax. No specific legislation was passed in order to enforce this legislation due to the language of the existing laws.

The Department will enforce N.C. Gen. Stat. § 105-164.8(b) which provides that a retailer who makes a remote sale is engaged in business in the state and is subject to sales and use tax if at least one of the following conditions is met:

  • the retailer, by purposefully or systematically exploiting the market provided by this State by any media-assisted, media-facilitated, or media-solicited means, including direct mail advertising, distribution of catalogs, computer-assisted shopping, television, radio or other electronic media, telephone solicitation, magazine or newspaper advertisements, or other media; or
  • the retailer consents, expressly or by implication, to the imposition of the tax

A retailer engaged in any of the above activities is evidence that the retailer consents to the sales and use tax imposed by the state.

A “remote seller” is a seller that does not have a physical presence in North Carolina and does not have any other legal requirement to register in North Carolina for sales and use tax purposes, but sells products for delivery into the state.

A “remote sale” is a sale of tangible personal property or digital property ordered by mail, telephone, via the Internet, or by another similar method by an out-of-state retailer to a purchaser who is in North Carolina at the time of the order.

To register with North Carolina, sellers have a couple of options. North Carolina is a full member of the Streamlined Sales and Use Tax Governing Board. Remote sellers can register with North Carolina and the 23 other member states by completing one online application through the Streamlined Sales Tax Registration System. If sellers wish to solely register with North Carolina, they can register using the state’s online business registration portal or by submitting a completed a Business Registration Application (Form NC-BR) to the Department. There is no fee to register with Streamlined or to apply for a certificate of registration in North Carolina. (Directive No. SD-18-6, North Carolina Department of Revenue, August 7, 2018).

UPDATE: North Carolina has enacted legislation that codifies the economic nexus provisions that the state issued in policy directive No. SD-18-6. For more information, read our news item: North Carolina Codifies Economic Nexus Provisions.

Posted on November 4, 2021