Marketplace facilitators could soon be responsible for tax on third-party sales in North Carolina
Updated 11.19.19: North Carolina Governor Roy Cooper signed S557. Marketplace facilitators must collect tax on behalf of third parties starting February 1, 2020.
North Carolina is getting closer to making marketplace facilitators liable for the tax on third-party sales made through the marketplace.
In fact, the North Carolina Legislature already tried doing so with House Bill 966. However, it’s now in political limbo. Governor Ray Cooper vetoed H966 in June, calling it “a bad budget with the wrong priorities” (his objections weren’t tied to the marketplace sales tax collection requirement). The House tried but failed to override the veto in September and has now placed the bill on the calendar for October 30, 2019.
Given the uncertain future of H966, it’s worth keeping an eye on Senate Bill 622 and Senate Bill 557, both of which would also make marketplace facilitators responsible for collecting and remitting tax on all their marketplace sales.
Under all three bills, a marketplace facilitator is considered the retailer if, in the previous or current calendar year, it has:
- More than $100,000 in gross sales in North Carolina; or
- At least 200 separate transactions in North Carolina
When calculating sales in the state, a marketplace facilitator should count all sales, including those facilitated on behalf of marketplace sellers. It appears that remote retailers would also include all sales into North Carolina when calculating the threshold — both direct sales and marketplace sales.
Marketplace facilitators meeting the above threshold would be required to collect and remit tax on behalf of all marketplace sellers, regardless of whether the seller:
- Has a physical presence in North Carolina
- Is required to be registered to collect North Carolina sales tax
- Collects and remits tax on sales not made through a marketplace
The bills also include a monthly reporting requirement for marketplace facilitators. Under S622 and H966, marketplace facilitators would have to provide (or make available) to each marketplace seller the gross sales of marketplace-facilitated sales, and the number of separate marketplace-facilitated transactions, no later than 20 days after the end of each calendar month. Under S557, the information must be available no later than 10 days after the end of each calendar month.
Marketplace facilitators wouldn’t be liable for failure to collect the proper tax due under any of the bills, provided they can demonstrate the error was due to incorrect information from the marketplace seller, and the facilitator didn’t receive specific written advice for the transaction at issue from the Secretary. They would also be protected from class actions related to the overpayment of the sales or use tax they collect on facilitated sales.
None of the measures prohibit a marketplace facilitator and marketplace seller from entering into an agreement regarding sales tax collection and remittance, “except that an agreement may not require a marketplace seller to collect and remit sales tax on marketplace-facilitated sales.” Presumably, sellers can opt to collect and remit the tax themselves.
The marketplace collection requirements described in H966, S622, and S557 would not apply to certain accommodations facilitators, admissions facilitators, or service contractor facilitators.
Marketplace facilitator legislation like the bills under consideration in North Carolina have been adopted in 36 states and the District of Columbia. North Carolina will likely jump on this marketplace sales tax wagon soon.
The 2021 sales tax changes report: midyear update
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