United States

North Carolina adopts marketplace facilitator nexus

TAX ALERT  | 

On Nov. 6, 2019, North Carolina Gov. Roy Cooper signed Senate Bill 557 requiring market facilitators to calculate, collect, and remit sales tax on their third-party sellers’ sales. The law provides that “marketplace providers” with 200 or more separate transactions per year or more than $100,000 in annual gross sales into the state are required to collect and remit sales taxes on behalf of their third-party sellers beginning Feb. 1, 2020.

North Carolina joins more than 30 states in adopting laws that require marketplace providers to collect the sales tax on third-party sales. Under the new law, a marketplace facilitator is defined as anyone who lists or makes available items for sale through a marketplace, and collects the sales price for the item or makes payment processing available to final purchasers. The marketplace is defined broadly under the statute and includes both physical and electronic forums.

The economic sales tax nexus thresholds ($100,000 in annual sales or 200 transactions) are calculated collectively. That is, the annual sales and transactions for all of the third-party sellers are combined to determine whether the marketplace facilitator meets the nexus thresholds. Marketplace facilitators and their third-party sellers cannot contractually alter the facilitator’s tax collection obligations.  

Takeaways

All businesses selling remotely into North Carolina either directly or indirectly should be aware of the new marketplace facilitator sales tax collection rules. The new law applies to all vendors including those located outside the United States. Those who might be characterized as facilitators and those selling indirectly through a third-party arrangement should assess their tax collection responsibilities under North Carolina law. The state, responding to the South Dakota v. Wayfair decision, previously enacted economic sales tax nexus effective Nov. 1, 2018 for remote sellers under the same thresholds as the new marketplace law. Remote vendors should consult their tax advisors for more information.

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