North Carolina may be the First State to Charge Tax on Online Sales

North Carolina will be the first state to issue a sales tax towards online retailers even if they are not located in the state, Governor Roy Cooper’s administration announced Wednesday. Revenue Secretary Ronald Penny says the online sales tax will be effective November 1st. The sales tax will be applied to companies selling over USD 100,000 or have at least 200 transactions in North Carolina last year or this year.

Online retailers were ordered by state tax collectors to collect sales tax on purchases by consumers in North Carolina on Tuesday. The move by the state to collect sales tax from online purchases comes after a U.S. Supreme Court came to a 5-4 decision overturning a 1992 U.S. Supreme Court decision in June, allowing states to collect sales tax even if the merchant does not have a physical presence in the state.

Large online retailers have been able to avoid collecting taxes on sales due to a 1992 U.S. Supreme Court ruling that stated sellers had to have a “substantial presence” there in order to pay sales taxes to a state, giving them an advantage over physical stores.

The N.C. Retail Merchants Association says the sales taxes will level the playing field between online retailers and brick and mortar retailers. “The North Carolina Retail Merchants Association commends the North Carolina Department of Revenue for their quick response in moving forward to require online retailers to collect and remit sales tax,” President and General Counsel Andy Ellen said in a statement.

The state will be charging a 4.5% sales tax for online retailers that are qualified.

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