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Tax Law

Marketplace Monday: North Carolina Enacts Marketplace Collection Law

On Friday, November 8, 2019, North Carolina’s Governor Roy Cooper signed Senate Bill 557, which among its provisions, requires marketplace facilitators to collect and remit sales tax in the state beginning on February 1, 2020. The economic thresholds for collection and remittance are gross sales of over $100,000 or two hundred or more separate transactions in the state for the previous or current calendar year. The economic thresholds apply to direct sales by the marketplace facilitator, and all marketplace facilitated sales for marketplace sellers.

S.B. 557 adopts a more narrow definition of “marketplace facilitator.” It defines a “marketplace facilitator” as a person that either directly or indirectly and whether through one or more affiliates: (1) lists or otherwise makes available for sale a marketplace seller’s items through a marketplace owned or operated by the marketplace facilitator, and (2) collects the sales price of a marketplace seller’s items, otherwise processes the payments, or makes payment processing services available for purchasers for the sale of the marketplace seller’s items.

Marketplace facilitators are required to collect and remit sales tax regardless of whether the marketplace seller for whom it makes a marketplace-facilitated sale is required to be registered to collect and remit sales tax in the state. Marketplace facilitators and marketplace sellers may enter into an agreement regarding the new law; however, such agreements cannot require a marketplace seller to collect and remit sales and use tax on marketplace-facilitated sales. The new marketplace collection law also provides class action protection for marketplace facilitators and liability relief if the marketplace facilitator receives incorrect information from the marketplace seller or if it does not receive specific written advice from the Secretary for the transaction at issue.

The new law also requires marketplace facilitator to provide marketplace sellers with information regarding the gross sales and number of transactions sourced to the state on its behalf within ten days after the end of each calendar month.

Why this is important: North Carolina was one of only nine remaining states with a sales tax that had not enacted a marketplace collection law. With the passage of S.B. 557, there are only eight states that have not enacted a marketplace collection law.

What to prepare for: Marketplace facilitators should prepare to collect sales tax in North Carolina state beginning on/or after February 1, 2020. Marketplace facilitators should also ensure that they have a system in place to provide notice reports to marketplace sellers on a monthly basis regarding the gross sales and number of transactions sourced to the state on the marketplace seller’s behalf.