WRAL Investigates

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

Posted September 9, 2010 2:36 p.m. EDT
Updated September 10, 2010 2:10 p.m. EDT

— 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.