GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2009
H D
HOUSE DRH10588-SVxz-5* (01/23)
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Short Title: Modernize Sales Tax Stat/Digital Products. |
(Public) |
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Sponsors: |
Representatives Weiss, Gibson (Primary Sponsors); Brubaker, Carney, Hill, Luebke, McGee, and Wainwright. |
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Referred to: |
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A BILL TO BE ENTITLED
AN ACT to modernize the sales and use tax statutes by treating music, movies, books, and computer software that are delivered electronically the same as those that are purchased in a tangible medium and by revising the "mail order" sales tax provisions to include specific references to internet sales.
The General Assembly of North Carolina enacts:
SECTION 1. G.S. 105-164.3 reads as rewritten:
"§ 105-164.3. Definitions.
The following definitions apply in this Article:
…
(1b) Audio work. - A series of musical, spoken, or other sounds, including a ringtone.
(1c) Audiovisual work. - A series of related images and any sounds accompanying the images that impart an impression of motion when shown in succession.
(1b)(1d)
Bundled transaction. - A retail sale of two or more distinct and identifiable
products, at least one of which is taxable and one of which is exempt, for one
nonitemized price. Products are not sold for one nonitemized price if an
invoice or another sales document made available to the purchaser separately
identifies the price of each product. A bundled transaction does not include
the retail sale of any of the following:
a. A product and any packaging item that accompanies the product and is exempt under G.S. 105-164.13(23).
b. A sale of two or more products whose combined price varies, or is negotiable, depending on the products the purchaser selects.
c. A sale of a product accompanied by a transfer of another product with no additional consideration.
d. A product and the delivery or installation of the product.
e. A product and any service necessary to complete the sale.
(1d)(1e)
Business. - Includes any activity engaged in by any person or caused to be
engaged in by him with the object of gain, profit, benefit or advantage, either
direct or indirect. The term "business" shall not be construed in
this Article to include occasional and isolated sales or transactions by a
person who does not hold himself out as engaged in business.
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(7a) Digital code. - A code that gives a purchaser of the code a right to receive an item by electronic delivery or electronic access. A digital code may be obtained by an electronic means or by tangible means. A digital code does not include a gift certificate or a gift card.
(7a)(7h)
Direct mail. - Printed material delivered or distributed by the United States
Postal Service or other delivery service to a mass audience or to addresses on
a mailing list provided by the purchaser or at the direction of the purchaser
when the cost of the items is not billed directly to the recipients. The term
includes tangible personal property supplied directly or indirectly by the
purchaser to the direct mail seller for inclusion in the package containing the
printed material. The term does not include multiple items of printed material
delivered to a single address.
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(17a) Load and leave. - Delivery
to the purchaser by use of a tangible storage media where the tangible storage
media is not physically transferred to the purchaser.
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(35f) Ringtone. - A digitized sound file that is downloaded onto a device and that may be used to alert the user of the device with respect to a communication.
…."
SECTION 2. G.S. 105-164.4(a) reads as rewritten:
"(a) A privilege tax is imposed on a retailer at the following percentage rates of the retailer's net taxable sales or gross receipts, as appropriate. The general rate of tax is four and one-half percent (4.5%).
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(6b) The general rate applies to the sales price of an item that is listed in this subdivision, is delivered or accessed electronically, and would be taxable under this Article if sold in a tangible medium. The retail sale of a digital code that is used to obtain any of the items taxed by this subdivision is considered a sale of that item. The tax applies regardless of whether the purchaser of the item has a right to redistribute it, to use it permanently, or to use it without making continued payments. The tax does not apply to an item that is taxed under another subdivision of this subsection or under G.S. 105-164.4C. A person who sells an item that is taxable under this subdivision is considered a retailer under this Article. The following items are subject to tax under this subdivision:
a. An audio work.
b. An audiovisual work.
c. A book.
d. Computer software.
…."
SECTION 3.(a) G.S. 105-164.3(18) is recodified as G.S. 105-164.3(33g) and reads as rewritten:
"(18)(33g) Mail order Remote
sale. - A sale of tangible personal property, ordered by mail, by telephone,
computer link, via the Internet, or other similar method, to a
purchaser who is in this State at the time the order is remitted, from a
retailer who receives the order in another state and transports the property or
causes it to be transported to a person in this State. It is presumed that a
resident of this State who remits an order was in this State at the time the
order was remitted."
SECTION 3.(b) The catch line of G.S. 105-164.8 reads as rewritten:
"§ 105-164.8.
Retailer's obligation to collect tax; mail order remote sales
subject to tax."
SECTION 3.(c) G.S. 105-164.8(b) reads as rewritten:
"(b) Mail Order Remote
Sales. - A retailer who makes a mail order remote sale is
engaged in business in this State and is subject to the tax levied under this
Article if at least one of the following conditions is met:
(1) The retailer is a corporation engaged in business under the laws of this State or a person domiciled in, a resident of, or a citizen of, this State.
(2) The retailer
maintains retail establishments or offices in this State, whether the mail
order remote sales thus subject to taxation by this State result
from or are related in any other way to the activities of such establishments
or offices.
(3) The retailer has
representatives in this State who solicit business or transact business on
behalf of the retailer, solicits or transacts business in this State by
employees, independent contractors, agents, or other representatives whether
the mail order remote sales thus subject to taxation by
this State result from or are related in any other way to such the solicitation
or transaction of business. A retailer is presumed to be soliciting or
transacting business by an independent contractor, agent, or other
representative if the retailer enters into an agreement with a resident of this
State under which the resident, for a commission or other consideration,
directly or indirectly refers potential customers, whether by a link on an
Internet Web site or otherwise, to the retailer, if the cumulative gross
receipts from sales by the retailer to purchasers in this State who are
referred to the retailer by all residents with this type of agreement with the
retailer is in excess of ten thousand dollars ($10,000) during the preceding
four quarterly periods. This presumption may be rebutted by proof that the
resident with whom the retailer has an agreement did not engage in any
solicitation in the State on behalf of the seller that would satisfy the nexus
requirement of the United States Constitution during the four quarterly periods
in question.
(4) Repealed by Session Laws 1991, c. 45, s. 16.
(5) The retailer, by purposefully or systematically exploiting the market provided by this State by any media-assisted, media-facilitated, or media-solicited means, including direct mail advertising, distribution of catalogs, computer-assisted shopping, television, radio or other electronic media, telephone solicitation, magazine or newspaper advertisements, or other media, creates nexus with this State.
(6) Through compact or reciprocity with another jurisdiction of the United States, that jurisdiction uses its taxing power and its jurisdiction over the retailer in support of this State's taxing power.
(7) The retailer consents, expressly or by implication, to the imposition of the tax imposed by this Article. For purposes of this subdivision, evidence that a retailer engaged in the activity described in subdivision (5) shall be prima facie evidence that the retailer consents to the imposition of the tax imposed by this Article.
(8) The retailer is a holder of a wine shipper permit issued by the ABC Commission pursuant to G.S. 18B-1001.1."
SECTION 4. G.S. 105-164.13(43a) is repealed.
SECTION 5. G.S. 105-467(a) is amended by adding a new subdivision to read:
"(8) The sales price of an audio work, audiovisual work, a book, and computer software that is subject to the general rate of tax under G.S. 105-164.4(a)(6b)."
SECTION 6. Section 4 of Chapter 1096 of the 1967 Session Laws, as amended, reads as rewritten:
"Sec. 4. Scope of Sales Tax. The sales tax which
may be imposed under this division after the holding of a special election is
limited to a tax at the rate of one per cent (1%) of: (1) the sale price
of those articles of tangible personal property now subject to the general rate
of sales tax imposed by the State under G.S. 105-164.4(a)(1) and (4b); 105-164.4(a)(1),
(4b), and (6b); (2) the gross receipts derived from the lease or rental of
tangible personal property when the lease or rental of the property is subject
to the general rate of sales tax imposed by the State under G.S. 105-164.4(a)(2);
(3) the gross receipts derived from the rental of any room or lodging furnished
by any hotel, motel, inn, tourist camp or other similar public accommodations
now subject to the general rate of sales tax imposed by the State under G. S.
105-164.4(a)(3); (4) the gross receipts derived from services rendered by
laundries, dry cleaners, cleaning plants and similar type businesses now
subject to the general rate of sales tax imposed by the State under G.S. 105-164.4(a)(4);
(5) The sales price of food and other items that are not otherwise exempt from
tax pursuant to G.S. 105-164.13 but are exempt from the State sales and
use tax pursuant to G.S. 105-164.13B; and (6) The sales price of prepaid
telephone calling service taxed as tangible personal property under
G.S. 105-164.4(a)(4d). The taxes authorized by this division do not apply
to sales that are taxable by the State under G.S. 105-164.4 but are not
specifically listed in this section.
The exemptions and exclusions contained in G.S. 105-164.13 and the sales and use tax holiday contained in G.S. 105-164.13C apply with equal force and like manner to the local sales tax authorized to be imposed and levied under this division. The county shall have no authority, with respect to the local sales and use tax imposed under this division, to change, alter, add, or delete any exemptions or exclusions contained under G.S. 105-164.13.
The local sales tax authorized to be imposed and levied under the provisions of this division shall be applicable to such retail sales, leases, rentals, rendering of services, furnishing of lodging or accommodations and other taxable transactions which are made, furnished or rendered by retailers whose place of business is located within the taxing county. The tax imposed shall apply to the furnishing of rooms, lodging or other accommodations within the county which are rented to transients. The sourcing principles in G.S. 105-164.4B apply in determining whether the local sales tax applies to a transaction. Provided, however, no tax shall be imposed where the tangible personal property sold is delivered by the retailer or his agent to the purchaser at a point outside this State."
SECTION 7. Section 3 of this act is effective when it becomes law. The remainder of this act becomes effective January 1, 2010, and applies to sales made on or after that date.