September 10, 2018
Most online business owners are focused on finding new ways to generate sales, attract new customers and increase profitability. This requires finding new digital venues to feature products, offer specials and drive customers to the company’s website. It also means regularly updating and refreshing inventory to ensure inventory matches customer demands. What most online business owners don’t spend time thinking about are tax planning and new sales tax collection laws. However, a recent Supreme Court ruling (South Dakota v Wayfair) has changed the laws governing when states can make online companies collect sales tax. Prior to the ruling, companies were required to have a physical presence (office space or warehouse location) to be required to collect sales tax. However, the ruling changed that and now requires states to require certain companies without a physical presence to collect sales and use tax. In early August of this year, North Carolina issued guidance on new sales tax collection regulations that impacts online companies. To help clients, prospects and others understand the changes and how it will affect their Georgia company, Wilson Lewis has provided a summary of key points below.
Key Details
Below is a summary of the key details of the law.
Who is a Remote Seller?
A remote seller is defined as any company that does not have a physical presence or any other legal requirement to register in North Carolina for a sales and use tax account but sells and delivers products to customers and others within the state.
What is a Remote Sale?
A remote sale is defined as the sale of tangible personal property or digital property that was ordered by mail, telephone, Internet or other methods by a purchaser located in North Carolina. The order must be remitted and fulfilled by a company located in another state.
What are the New Requirements?
The law requires that remote sellers with $100,000 or more in sales or 200 or more separate transactions (in the current or prior year) with North Carolina customers need to register, collect and remit sales and use tax on qualifying transactions. Qualifying companies are required to implement these changes no later than November 1, 2018, or 60 days after they have met the threshold. It’s important to note these regulations do not apply to a company if they already have a presence in North Carolina as they are subject to different tax rules. Additionally, please be aware that non-US companies that meet the qualification criteria are obligated to follow the new guidance.
How Do Companies Register?
There are two ways to register for program participation. North Carolina is a member of the Streamlined Sales and Use Tax Governing Board, which allows a remote seller to register with all 24-member states concurrently. The application is available on their website and there is no filing fee. Alternatively, a company can register directly with the North Carolina Department of Revenue by submitting Form NC-BR, Business Registration Application for Income Tax Withholding, Sales and Use Tax, and Other Tax and Service Charges. It’s important to note there is no fee to apply for registration in North Carolina.
Contact Us
North Carolina’s new guidance makes it clear that qualifying companies will soon need to begin complying with updated regulations. Impacted companies will need to review their internal accounting practices to ensure the proper collection and remittance of sales tax to the state. Since sales and tax collection laws vary by state, it’s important to conduct a comprehensive review of company sales to determine where liabilities may exist. If you have questions about the North Carolina regulations or need assistance with sales and use tax collection in another state, Wilson Lewis can help! For additional information please call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.