Cyber Monday and the Internet sales tax

Have you been busy taking advantage of the CyberMonday deals available online today through Wayfair, Overstock, or other online retailers not based in North Carolina?

The North Carolina Department of Revenue (NCDOR) tried to make shopping more cumbersome for you and those companies. Instead of waiting for direction from the legislature on critical elements that could prevent overreach, tax collectors took a US Supreme Court decision as an excuse to say “Bah! Humbug!” to the idea that state law is needed to guide how it collects taxes.

Legislators can and should answer three big questions before companies are forced to collect sales taxes on internet sales into North Carolina.

  1. What taxes can be cut to offset the state’s new revenue? Though not technically a tax increase, because North Carolinians should have been diligent in pay their sales tax obligation with their income taxes, the new rule could mean new revenue for state government. Legislators can offset the $500 million projected by supporters of the new tax collection requirement with a quarter-cent cut in the sales tax rate.
  2. Should companies be liable and audited for sales before November 1, 2018? NCDOR’s directive says that companies who have met the the 200 transaction or $10,000 sales threshold in 2017 must report. That means companies could have books audited back to January 2017 for sales involving a person or business in North Carolina for a directive published in September, taking effect this month. Companies should not be subject to audit for anything before January 2018, better would be January 2019.
  3. Which companies should collect sales taxes? NCDOR said in its September directive that companies with more than 200 transactions or $10,000 in sales into North Carolina would need to collect sales tax on each of those transactions. Business-to-business transactions should be excluded from either total, particularly those involving a non-profit organization that is exempt from sales taxes.

Joseph Coletti / Senior Fellow

Joe Coletti is a senior fellow at the John Locke Foundation focused on fiscal policy issues. He previously headed the North Carolina Government Efficiency and Reform initiativ...

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