NC prepping to collect sales tax from online retailers

The U.S. Supreme Court ruled 25 years ago that retailers don't have to collect sales tax unless they have a physical presence in a state, but pressure is building on Congress to enact legislation that would require the collection of sales tax on all online transactions.

"What states are arguing today is that, with economic nexus, with computers, with technology, the way things are more globally interacted, it would no longer be a burden for retailers to do this," Cindy Avrette of the General Assembly's Research Division told members of the Senate Finance Committee on Wednesday.

Seventeen states have legislation pending similar to North Carolina's Senate Bill 81, Avrette said, and a number of others are trying to expand the definition of a physical presence for retailers.

Senate Bill 81 would establish an "economic nexus" of at least 200 sales in North Carolina a year or $100,000 in revenue from sales in the state as enough to require a retailer to collect sales tax.

Sen. Tommy Tucker, R-Union, said North Carolina modeled its proposal after one that was struck down this week in South Dakota. That law is viewed as the best test case for the Supreme Court to overturn its earlier ruling or for Congress to take action, Avrette said.

Adopting Senate Bill 81 would ensure that North Carolina has a law on the books so the state could immediately start reaping the benefits of any new court ruling or federal law on online sales tax, Tucker said.

"We need to do something, whether this is the correct fix or something else," said Sen. Floyd McKissick, D-Durham "There's a lot of internet sales out there going on."

The North Carolina Retail Merchants Association favors the bill as a way to level the playing field with online competitors out of state, while the Washington, D.C.-based Internet Association opposes it, Tucker said.

"My wife is against this bill," he added with a laugh, bemoaning her penchant for online shopping and the resulting chore for him to calculate the sales tax to report on their annual income tax return.

"My wife probably went to a physical brick-and-mortar store twice this Christmas. Everything for the kids and me showed up on the back doorstep or the front doorstep shipped in, and the state has no recourse on charging (tax) for that," he said.