by Brenée Goforth
Communications Associate, John Locke Foundation
This week, JLF’s Joe Coletti was quoted in a Heartland Institute article on internet sales tax. The article focuses on S.B. 523, a piece of legislation signed into law in July. The article’s author, Vivian Jones, writes:
S.B. 523 “broadens the scope of sales tax on digital property by eliminating the requirement under the state’s tax code that a digital item must have a taxable, tangible corollary in order to be taxable…”
Examples of goods with a “tangible corollary” include audio files, which are also sold on compact disks. Examples of items that fall into the intangible digital property category include e-learning materials and audiovisual materials sold as digital products that do not exist in a physical form…
The new law will apply to sales occurring on or after October 1.
The article quotes Coletti in explaining the breadth of the new law:
“The law provides a little clarity on what is taxable, because it is helpful to have a general definition of ‘item’ instead of trying to discern a service from personal property or digital property,” Coletti said. “This makes the law more convenient for regulators, as it lumps the sale of just about anything in any way as a taxable transaction.”
Coletti emphasized that a more significant change in North Carolina sales taxes took effect on November 1, 2018, without legislative action. The North Carolina Department of Revenue (NCDOR) ordered companies that met or surpassed the threshold of either (1) $100,000 of sales in North Carolina or (2) 200 separate transactions in North Carolina to begin reporting and collecting sales taxes in the state. NCDOR adopted this threshold (also known as a “nexus”) after it was upheld as appropriate for South Dakota in the U.S. Supreme Court Case, South Dakota v. Wayfair. The General Assembly has never determined an appropriate nexus for North Carolina. Until they do, North Carolina will continue to use the South Dakota nexus – a threshold set for a state whose economy is less than a tenth of North Carolina’s.