On November 8, 2019, North Carolina Governor Roy Cooper signed legislation adopting market-based sourcing for corporate income tax apportionment purposes and requiring marketplace facilitators to collect and remit sales and use tax. The legislation also increases the standard deduction for individuals.
Under the legislation, and effective for taxable years beginning on or after January 1, 2020, receipts are sourced to North Carolina if the taxpayer’s market for the receipts are in North Carolina. If the taxpayer is unable to determine the state or states to which receipts of a sale are sourced using a method to reasonably approximate, the receipts are to be excluded from the denominator in calculating the sales factor for apportioning income to North Carolina.
A taxpayer’s market for receipts is in North Carolina as follows: for the sale of tangible personal property, if and to the extent the property is received in North Carolina by the purchaser; for the sale, rental, lease, or license of real property or tangible personal property, if and to the extent the property is located in North Carolina; for the delivery of goods by common carrier or by other means of transportation, including transportation by the purchaser, the place at which the goods are ultimately received after all transportation has been completed is considered the place at which the goods are received by the purchaser; for the sale of a service, if and to the extent the service is delivered to a location in North Carolina; for intangible property that is rented, leased, or licensed, if and to the extent the property is used in North Carolina.
Effective February 1, 2020, the legislation requires marketplace facilitators to collect and remit sales tax on a third-party seller’s behalf if, in the current or previous calendar year, the marketplace facilitator had gross sales in excess of $100,000 sourced to North Carolina or 200 or more separate transactions sourced to North Carolina. If these thresholds are met, the marketplace facilitator is considered the retailer and is liable for collecting and remitting sales and use tax on each marketplace-facilitated sale it makes, regardless of whether the marketplace seller for whom it makes a marketplace-facilitated sale is required to register to collect and remit sales and use tax in North Carolina or has a physical presence in North Carolina.
A marketplace facilitator is defined as:
A person that, directly or indirectly and whether through one or more affiliates, … [l]ists or otherwise makes available for sale a marketplace seller’s items through a marketplace owned or operated by the marketplace facilitator [and] … [c]ollects the sales price or purchase price of a marketplace seller’s items or otherwise processes payment [and/or] [m]akes payment processing services available to purchasers for the sale of a marketplace seller’s items.
The legislation increased the standard deduction amounts effective for taxable years beginning on or after January 1, 2020 based on filing status as follows: $21,500, married filing jointly (currently, $20,000); $16,125, head of household (currently, $15,000); $10,750, single and married taxpayers filing separately (currently, $10,000).
If you have any questions about the North Carolina Legislative Update, contact the professional at Gilliam Bell Moser LLP