North Carolina Enacts Changes to its Economic Nexus Standard for Sales Tax

Effective as of July 1, 2024, the NC legislature has changed its economic nexus standard for sales tax.  The new law (NC H.B. 228) repeals North Carolina’s 200 transaction based economic nexus annual threshold for purposes of requiring remote retailers and marketplace facilitators to collect and remit North Carolina sales and use tax.

This law change leaves in place the gross sales in excess of $100,000 threshold from remote sales sourced to North Carolina for the previous or current calendar year.

North Carolina Department of Revenue has issued Sales Tax Directive 24-1 which indicates North Carolina’s remote seller nexus thresholds now consist of the following:

• The retailer makes gross sales in excess of $100,000 from remote sales sourced to North Carolina, including sales as a marketplace seller, for the previous or the current calendar year, or
• The retailer is a marketplace facilitator that makes gross sales in excess of $100,000, including all marketplace-facilitated sales for all marketplace sellers, from sales sourced to North Carolina for the previous or the current calendar year.

The administrative guidance also addresses how a remote seller may cancel its current North Carolina registration if it meets the following requirements:

• It did not make gross sales sourced to North Carolina of more than $100,000 during 2023;
• It did not make gross sales sourced to North Carolina of more than $100,000 from January 1, 2024, through the date it cancels its registration in 2024; and
• It is not otherwise engaged in business in North Carolina.

You can read more about this change from NCDOR Directive 24-1 at the link below.

https://www.ncdor.gov/sd-24-1-repeal-transaction-thresholdpdf/open

Please note, the law change above has no impact on sellers which have a physical presence within North Carolina.  Sellers with employees, inventory, fixed assets, or other physical connections to the state are deemed to have nexus for sales tax regardless of whether their gross receipts exceed the $100,000 test or not.

North Carolina joins a growing number of states that have adopted revisions to their economic nexus standards for sales tax to eliminate a transaction count threshold.  These states are finding the dollar amount threshold a more effective measure of significant activities.  This also relieves some confusion within the business community about how to determine what represents a “transaction” for this test.

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About the Author

Jason Pritchard is a partner in GreerWalker’s Greenville, SC tax practice.  Jason joined GreerWalker in 2017.  Prior to joining the firm, Jason was most recently responsible for the oversight of state & local tax accounting and compliance at a global top five financial institution.

In addition, Jason spent 10+ years at a Fortune 50 retail company where he was responsible for all aspects of federal, state & international taxation.  Jason has 20+ years of experience evaluating and resolving US federal and state audit issues, the financial evaluation of proposed mergers and acquisitions and in the development and implementation of strategic business technology. Jason also works with clients to identify and implement federal, state & local tax and development incentives.

For questions and guidance about these changes, reach out to Jason at jason.pritchard@greerwalker.com or (864) 752-0084.

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