Large online retailers will have to start paying sales tax to North Carolina even if they aren’t located here, Gov. Roy Cooper’s administration announced Wednesday.
The directive from Revenue Secretary Ronald Penny says the state will begin collecting the taxes on Nov. 1. Companies will not be required to retroactively pay the tax. For online shoppers, the directive means they will to pay sales taxes on most of their purchases.
The directive is the state’s response to a June decision by the U.S. Supreme Court.
Big internet companies have been able to avoid collecting tax in the state where the sales take place because of a 1992 U.S. Supreme Court ruling that said sellers had to have a “substantial presence” there in order to pay sales taxes to a state. That put brick-and-mortar stores at a disadvantage because they have to pay the tax.
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The N.C. Retail Merchants Association says the directive levels the playing field between main street retailers and remote sellers.
“The North Carolina Retail Merchants Association commends the North Carolina Department of Revenue for their quick response in moving forward to require online retailers to collect and remit sales tax,” president and general counsel Andy Ellen said in a statement.
In June, the U.S. Supreme Court in a 5-4 decision overturned the 1992 ruling and upheld a South Dakota law that required sellers to collect a 4.5 percent sales tax if they had more than $100,000 in annual sales or more than 200 transactions.
The states have been waiting for Congress or the Supreme Court to resolve a dispute that has become more pressing with the growth of online shopping. After the court took action in June, it wasn’t clear whether Congress or the states would take the next step to begin collecting the taxes.
Penny said in a statement released on Wednesday that he was issuing the directive under the authority of a state statute that allows the revenue secretary to interpret North Carolina sales and use tax laws.
Penny’s directive mirrors legislation that has been on hold in the General Assembly since last year. It requires sales tax from out-of-state sellers that have gross sales from the state in excess of $100,000 or having 200 or more separate transactions in the state in the previous or current calendar year.
Consumers who bought goods from out-of-state companies that did not collect sales tax were required to declare the purchase on their income tax forms, but that has been an inconsistent practice.
Now, large merchants will be required to collect those taxes and pay them to the state, which means companies will more than likely pass that tax onto consumers.
In 2014, Amazon said it would pay sales tax in North Carolina. That was before it set up distribution centers here. The company has been paying the state voluntarily; this makes it mandatory for direct purchases.
Many third-party sellers on Amazon Marketplace don’t charge sales tax. They will have to start if they meet those thresholds.