North Carolina legislators have been trying for years to tax online companies that sell goods in North Carolina without collecting the sales tax. Getting the sales tax on those sales would be all gravy for the state, the reasoning goes, because nobody actually pays the use tax through their income tax forms. (Maybe the Department of Revenue should check legislators’ tax returns for this line item.)

It turns out some companies in North Carolina sell goods online to customers in other states. And they’re not retail giants like Lowe’s Home Improvement. What would happen if all of these companies had to start paying sales tax in those states? The News and Observer writes about one local store.


At the Wine Merchant in Raleigh’s Ridgewood Shopping Center, online sales make up 15 percent to 20 percent of the business, with 90 percent of such orders shipped out of state, manager Jason Kaczor said.

Online sales are like having a second or third store for many businesses, he said. “It’s a very cost-effective way of doing business,” he said. “You’re not sitting on product until you sell it.”

This story comes in an article on a federal bill that could restrict interstate wine sales. This is a federal law, but think about what happened to local companies when the state tried to tax Amazon based on their existence: Amazon dropped them as affiliates then had to sue the state to protect private information on its customers. This has poisoned the environment for new tech startups in the state.

The lesson of all of this is that excessive tax and regulatory burdens hurt consumers and and businesses in North Carolina, shrinking the economy. A smaller economy is not conducive to collecting the higher taxes needed to fund the tax and regulatory apparatus to enforce the higher tax and regulatory burden.