WRAL Investigates

Perdue: College gear sales-tax disparity 'makes no sense'

Posted September 9, 2010
Updated September 10, 2010

— Gov. Bev Perdue said Thursday that she was surprised by a WRAL News investigation into online sales-tax disparities over state university merchandise.

She sent a letter to University of North Carolina President Erskine Bowles on Thursday asking him to review "each (school's) policy ... and create a standardized method of collecting sales tax."

"If legislation is needed to address this issue, I am willing to include it as a part of my legislative package to present to the 2011 General Assembly," she wrote.

Customers who walk into a retail store to buy fan merchandise of their favorite state university have to pay sales tax. But if they buy from the official college website, they don’t have to pay sales tax if the online vendor is out of state.

“My reaction is one of surprise," Perdue said. "I mean, I don't understand how you buy a T-shirt that's university-sanctioned on a campus and pay sales tax, but you go to their store's website and you don't pay sales tax. It makes no sense."

Although the online vendor may be out of state, the merchandise often originates in North Carolina. Perdue says that's not fair to competing retailers.

“This is a national issue. If we're going to collect sales tax in our traditional retail outlets, I believe virtual sales tax is incumbent upon all of us,” she said.

North Carolina State University’s official merchandiser, Go Pack, said it has already pushed its out-of-state online vendor to start charging.

The store supplies all the merchandise for online orders that come through CBS Interactive, which took over the school's web-based business on Aug. 1. Officials quickly realized after switching vendors that sales tax was no longer being charged for North Carolina-bound memorabilia.

“We’ve gone back and looked, and we had numerous orders – 300 orders – that were not charged sales tax, so we’re in the process of adding all that up and making sure it gets paid, whether we pay it or CBS pays it,” said store manager Ruth Hearn.

A CBS Interactive spokesman said it’s perfectly legal not to charge sales tax. CBS handles the order, buys the merchandise wholesale, and then sells it to online customers, he said.

“Since CBS does not have business entities in North Carolina, we are not required by law to pay state tax,” the spokesman said.

Brad Wilson, former chairman of the UNC Board of Governors, said he believes the governor's logic makes sense.

“I don't know what the ultimate solution might be, but it seems to be the question of fundamental fairness. Should we generate revenue from that which we own? The answer would be yes,” he said.

Another question to ponder is, under the university tax-free scenario, what's stopping other businesses from contracting out-of-state fulfillment services to get around collecting sales tax?

“It certainly presents all of us with a new dilemma, doesn't it?” Perdue said. “It's a conundrum. A lot of us never had considered that.”

The state Department of Revenue has battled with online retailers like Amazon over sales tax collection, but the state university questions haven't come up publicly. It's unclear how soon the UNC Board of Governors might take up the governor's recommendations.


This story is closed for comments.

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  • mgratk Sep 10, 2010

    Hey, Bev, if I buy a t-shirt, chances are good I've already paid taxes on that money three or four times already, AT LEAST! How about cutting costs and cutting sales tax.

  • ncguy Sep 10, 2010

    Bev is mad as fire about not getting her taxes!

    people called robin hood a hero too...

  • cwood3 Sep 10, 2010

    Bev has never scene a tax she did not like. Wow-these folks in Raleigh really like spending OUR MONEY.

    Let's see how angry NC voters are in November. It's time for changes!!! We will see.

  • WXYZ Sep 10, 2010

    "Makes no sense" What makes no sense is the Tax-everything-Democrats can not understand that government taxes and fees will increase and prolong this recession. Not collecting a tax or a fee is not new--e.g. "tax-free weekend" in August--how good an example is that for how cutting/stopping taxes can stimulate the private sector and thereby promote economic recovery. She should have said: "we are in a recession and we must cut taxes whenever and where ever possible. This is a tax we can stop". What we need is more unemployed Democrats--THEN "maybe" they would understand what "makes no sense".

  • oyid Sep 10, 2010

    I have an idea...levy a 'deductible tax' on all the big telcos and other communication companies that provide the internet infrastructure. Based the proportion of tax on the amount of revenue generated from customers that subscribe (CABLE, DSL, Wireless WAN (4G)) to broadband service. The companies will be able to deduct most of the tax the following year. After securing a certain number of subscribers, no tax is collected from the individual companies on additional revenue. Rural customers would be lumped with the nearest metro. Just a thought.

  • oyid Sep 10, 2010

    Bye Fabians! Unbelievable...that they are still pursuing this Use Tax issue. Cut spending! Cut out welfare...dang! If you're not disabled, handicapped, senior citizen or a minor age, GET TO WORK! I mean, in order to get Unemployment benefits, you have to work...so how do you get welfare without paying SOMETHING for it? Now the state wants to squeeze us...sum mo'!

  • FE Sep 10, 2010

    "(Bev) seems to have a repetitive behavior which is a symptom... a repetitive behavior of taxing." - Mugu

    It's actually just an advanced case of democrat-itis, otherwise known as tax everything in sight. Another common symptom of this illness is to take YOUR money and give it to someone else.

    The affliction is quite common on Jones Street and in Washington.


  • Mugu Sep 10, 2010

    Does Bev have Autism? She seems to have a repetitive behavior which is a symptom... a repetitive behavior of taxing.

  • wildcat Sep 10, 2010

    Voting time comes and Purdue is OUT!

  • FE Sep 10, 2010

    "but does anyone know if it's true that the value of health ins provided by your employer will be added to your W-2 so it can be taxed?" - Garnerwolf1

    NOT, repeat NOT, true in spite of all of the dire email warnings that are circulating out there.

    Medical insurance benefits will be REPORTED on your W2 (along with numerous other things) starting in 2011 but will NOT lead to an increase to your "income." Well, at least not yet......