State News

State offers deal if e-retailers collect sales taxes

Posted April 23, 2010 10:04 a.m. EDT
Updated April 23, 2010 2:12 p.m. EDT

— North Carolina tax collectors say Internet retailers have until August to agree to collect sales taxes the state says it is owed through the work of independent businesses.

The state Revenue Department said Friday that North Carolina expects to lose about $162 million in uncollected sales taxes from e-commerce transactions this year, and more than $400 million over the next two years.

The question is whether North Carolina and other states have the legal stick to hit Internet retailers if the carrot of Friday's amnesty offer doesn't work.

North Carolina and other states say they are owed sales taxes because some state residents running their own Web sites posted links driving business to companies like and then collected a share of sales.

Last year, North Carolina passed a law that required out-of-state retailers to collect sales tax in the state if they have marketing affiliates within the state.

Amazon responded by ending its affiliate program in North Carolina and currently doesn't collect sales tax from North Carolina customers.

The company sued North Carolina Revenue Secretary Ken Lay this week in an effort to block the state's effort to obtain information on the online retailer's North Carolina customers to collect sales taxes from them.

Amazon says the customers have a right to keep their buying habits private, but Lay responded by saying the state just wants to collect the tax owed on purchases.

Research done by the University of Tennessee indicates that North Carolina will lose $161.8 million in sales tax revenue from e-commerce transactions in 2010, with the figure rising to $190.2 million in 2011 and $213.8 million in 2012.

“Participation in this program benefits the state, e-commerce and traditional retailers,” Lay said in a statement. “The department is committed to supporting North Carolina business and facilitating the equitable collection of taxes from all taxpayers both individual and corporate.”