Do You Need to Get a Sales Tax Permit in North Carolina?
Quick Answer: You need to get a sales tax permit in North Carolina if you meet economic, physical presence, or affiliate nexus requirements as determined by the state. Read on for more detailed information.
What is Sales Tax Nexus Anyway?
Your business owes sales tax in any state where it has “sales tax nexus”. In short, if you have sales tax nexus you need to collect and remit sales tax. If you don’t have sales tax nexus, you generally don’t need to get a permit.
Sales tax nexus is a legal term that means you have crossed a threshold and now have a sales tax collection responsibility in the state. Nexus can be created by having a physical presence, economic presence, or by other factors. Nexus rules vary by state and retailers have specific nexus rules based on where they have people, property or inventory.
What Should You Do Once You Determine You Have Sales Tax Nexus?
Once you determine that you have sales tax nexus in North Carolina, your next step is to register for a sales tax permit in the state. Check out our blog post on getting a sales tax permit in North Carolina for more information about that process.
Common Ways to Have Sales Tax Nexus in North Carolina
1. Economic nexus in North Carolina
If you had $100,000 or more retail sales AND had 200 or more separate transactions in North Carolina in the previous or current calendar year, then you are required to register for, collect, and pay sales tax to the state. If you meet this threshold, it does not matter if you have a physical presence in North Carolina. Nexus has been created based on your volume of sales.
For more information, please see North Carolina Dept. of Revenue N.C. Gen. Stat. § 105-164.8
If you need help determining which states you have crossed economic nexus thresholds, check out our Sales Tax Starter Kit service.
2. Physical presence nexus in North Carolina
North Carolina considers a seller to have sales tax nexus in the state with any of the following:
- Maintaining, occupying, or using permanently or temporarily, any office, place of distribution, sales or sample room, warehouse or storage place, or other place of business for selling or delivering tangible personal property, digital property, or a service for storage, use, or consumption in the state.
- Maintaining tangible personal property or digital property for the purpose of lease or rental in the state.
- The retailer solicits or transacts business in North Carolina by employees, independent contractors, agents, or other representatives.
- The retailer, by purposefully or systematically exploiting the market provided by the state by any media-assisted, media-facilitated, or media-solicited means, including direct mail advertising, distribution of catalogs, computer-assisted shopping, television, radio or other electronic media, telephone solicitation, magazine or newspaper advertisements, or other media, creates nexus with North Carolina. A nonresident retailer who purchases advertising to be delivered by television, radio, in print, on the Internet, or by any other medium is not considered to be engaged in business in North Carolina based solely on the purchase of the advertising.
For more information, see Chapter 105, Article 5, 15-164.3(9)
If you need help determining which states you have a physical presence in, check out our Sales Tax Starter Kit service.
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Uncommon Ways to Have Sales Tax Nexus in North Carolina
1. Affiliate Nexus in North Carolina
What exactly is affiliate nexus? Affiliate nexus can exist when a business has sufficient contact with a state through a separate business. If your out-of-state business has a relationship with an in-state business, then you may have affiliate nexus.
Please keep in mind that an “affiliated business” does not necessarily mean that it is a marketing “affiliate” in the typical sense of the word. Instead, “affiliate nexus” refers to the relationship between two businesses.
You may have affiliate nexus if your business has ties to a business in North Carolina and the following are true:
- You enter into an agreement with a resident of the state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet Web site or otherwise, to the retailer, and
- The cumulative gross receipts from sales by the retailer to purchasers in the state who are referred to the retailer by all residents with this type of agreement with the retailer are in excess of ten thousand dollars ($10,000) during the preceding four quarterly periods.
For more information about affiliate nexus, see Chapter 105, Article 5, 15-164.8(b)(3).
Do You Need a Sales Tax Permit in North Carolina If You Only Sell on Marketplaces?
North Carolina is not currently a marketplace collection state. However, marketplace collection requirements go into effect beginning 2/1/2020. Amazon, eBay, and other marketplaces are NOT required to collect or pay sales tax in North Carolina until that date. Until then, you, as the seller are responsible for collecting and remitting the sales tax due in North Carolina for sales on a marketplace. As of the publishing of this blog, North Carolina has not released guidance on whether a seller will be required to have a permit if all of their sales are on approved marketplaces.
For more information, see Senate Bill 557 Pg.20-21.
If you are an e-commerce seller who is unsure of where you need to get a sales tax permit, feel free to check out our Sales Tax Starter Kit service.
Disclaimer: Our attorney wanted you to know that no financial, tax, legal advice or opinion is given through this post. All information provided is general in nature and may not apply to your specific situation and is intended for informational and educational purposes only. Information is provided “as is” and without warranty.