The Taxation of Digital Property in North Carolina
- Aug 15, 2013 | Gail Cole
In North Carolina, the general rate of sales tax applies to certain digital property that is delivered or accessed electronically, if it is not considered tangible personal property and would be subject to tax were it sold "in a tangible medium." Tax applies no matter how long the purchaser has the right to use the item.
Taxable digital property includes:
- Audio works;
- Audiovisual works;
- Books, magazines, newspapers, newsletters, reports or other publications; and
- Photographs and greeting cards.
Sales of digital property are sourced in the following manner:
- If the purchaser receives digital property at the business location of the seller, the sale is sourced to that business location and taxed accordingly.
- If the purchaser receives the digital property at a location specified by the purchaser, but not at the business location of the seller, the sale is sourced to the place where the purchaser receives the digital property.
- If neither situation applies, "the sale of digital property is sourced to the location indicated by an address for the purchaser," as per the seller's business records. Lacking this address, the sale is sourced to "the location indicated by an address for the purchaser obtained during the consummation of the sale."
- Barring any of the above, "the location will be determined based on the address from which the digital good was first available for transmission by the seller."
Eventually, an address for the purchaser--and the applicable rate of taxation--will be revealed.
Sourcing rules for sales of digital goods are available in an North Carolina Department of Revenue.
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