2020 Sales and Use Tax Law Changes

The Revisor of Statutes is authorized to renumber the subdivisions of G.S. 105-164.3 to ensure that the subdivisions are listed in alphabetical order and in a manner that reduces the current use of alphanumeric designations, to make conforming changes, and to reserve sufficient space to accommodate future additions to the statutory section. There are multiple definitions that have not been renumbered but have been placed in alphabetical order.

The definitions included in Senate Bill 557, Session Law 2019-246, and in House Bill 1079, Session Law 2020-6, that are not yet included by the Revisor of Statutes in G.S. 105- 164.3, are marked with an asterisk (*) and included in alphabetical order within the other definitions included below and numbered as (*) since the actual number assigned is not yet known.

The 2018, 2019, and 2020 General Assembly added new defined terms and amended multiple definitions for existing defined terms. The changes and their effective dates are as follows:

Accommodation – (*). The definition of the term was previously codified as G.S. 105- 164.4F(a)(1) and continues to be defined as “[a] hotel room, a motel room, a residence, a cottage, or a similar lodging facility for occupancy by an individual.” 

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(d), S.L. 2019-246.)

Accommodation Facilitator – (*). The definition of the term is added and defined as “[a] person that contracts, either directly or indirectly, with a provider of an accommodation to perform, either directly or indirectly, one or more of the activities listed in this subdivision. The term includes a real estate broker as defined in G.S. 93A-2. The activities are:

a. Market the accommodation and accept payment or collect credit card or other payment information for the rental of the accommodation. 
b. List the accommodation for rental on a forum, platform, or other application for a fee or other consideration.”

The “accommodation facilitator” definition is intended to replace the definition of the terms “facilitator” in G.S. 105-164.4F(a)(2) and “rental agent” in G.S. 105-164.4F(a)(3) that are repealed.

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(d), S.L. 2019-246.)

Additional Digital Goods – (*). The definition of the term is added and defined as “[a]ll of the following if transferred electronically:

a. A magazine, a newspaper, a newsletter, a report, or another publication. 
b. A photograph. 
c. A greeting card.”

(Effective retroactively to October 1, 2019, and applies to sales occurring on or after that date; HB 1079, s. 3(a), S.L. 2020-6.)

Admission Charge – (*). The definition of the term was previously codified as G.S. 105- 164.4G(a)(1) and continues to be defined as “[g]ross receipts derived for the right to attend an entertainment activity. The term includes a charge for a single ticket, a multi-occasion ticket, a seasonal pass, and an annual pass; a membership fee that provides for admission; a cover charge; a surcharge; a convenience fee, a processing fee, a facility charge, a facilitation fee, or similar charge; or any other charges included in gross receipts derived from admission.”

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(h), S.L. 2019-246.)

Admission Facilitator – (*). The definition of the term is added and defined as “[a] person who accepts payment of an admission charge to an entertainment activity and who is not the operator of the venue where the entertainment activity occurs.”

The “admission facilitator” definition is intended to replace the definition of the term “facilitator” in G.S. 105-164.4G(a)(4) that is repealed.

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(h), S.L. 2019-246.)

Affiliate – (*). The definition of the term is added and provides that the term is “[d]efined in G.S. 105-130.2.”

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(m), S.L. 2019-246.)

Amenity – (*). The definition of the term was previously codified as G.S. 105- 164.4G(a)(2) and continues to be defined as “[a] feature that increases the value or attractiveness of an entertainment activity that allows a person access to items that are not subject to tax under . . . Article [5 of Chapter 105 of the North Carolina General Statutes] and that are not available with the purchase of admission to the same event without the feature. The term includes parking privileges, special entrances, access to areas other than general admission, mascot visits, and merchandise discounts. The term does not include any charge for food, prepared food, and alcoholic beverages subject to tax under . . . Article [5 of Chapter 105 of the North Carolina General Statutes].”

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(h), S.L. 2019-246.)

Capital Improvement – (21). The definition of the term is amended and provides that a capital improvement includes “[o]ne or more of the following:
“ . . .
k. [a]n addition or alteration to real property that is permanently affixed or installed to real property and is not an activity listed in subdivision (191) of this section as repair, maintenance, and installation services. [Emphasis added.]
. . .”

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(m), S.L. 2019-246.)

Certain Digital Property – (23). The definition of the term is amended as “[s]pecified digital products and additional digital goods. The term does not include an information service or an educational service.” [Emphasis added.]

(Effective retroactively to October 1, 2019, and applies to sales occurring on or after that date; HB 1079, s. 3.(a), S.L. 2020-6.)

Digital Audio Work – (7). The definition of the term is amended as “[a] work that results from the fixation of a series of musical, spoken, or other sounds, including a ringtone, that is transferred electronically.” [Emphasis added.]

(Effective retroactively to October 1, 2019, and applies to sales occurring on or after that date; HB 1079, s. 3(a), S.L. 2020-6.)

Digital Audiovisual Work – (9). The definition of the term is amended as “[a] series of related images, that when shown in succession, impart an impression of motion, together with accompanying sounds, if any, and that is transferred electronically.” [Emphasis added.]

(Effective retroactively to October 1, 2019, and applies to sales occurring on or after that date; HB 1079, s. 3(a), S.L. 2020-6.)

Digital Book – (*). The definition of the term is added and defined as “[a] work that is generally recognized in the ordinary and usual sense as a book that is transferred electronically.”

(Effective retroactively to October 1, 2019, and applies to sales occurring on or after that date; HB 1079, s. 3(a), S.L. 2020-6.)

Educational Service – (58). The definition of the term is added and defined as “[t]he delivery of instruction or training, whether provided in real time, on demand, or at another set time, by or on behalf of a qualifying educational entity where at least one of the following conditions applies:

a. The instruction or training is part of the curriculum for an enrolled student. 
b. The instruction or training is encompassed within the institution’s accreditation or prepares an enrolled student for gainful employment in a recognized occupation. 
c. The participant is evaluated by an instructor. ‘Evaluated by an instructor’ does not include being graded by, scored by, or evaluated by a computer program or an interactive, automated method. 
d. The participant is connected to the presenter or instructor via the Internet or other networks, allowing the participant to provide, receive, or discuss information through live interaction, contemporaneous with the presentation.” [Emphasis added.]

(Effective retroactively to October 1, 2019, and applies to sales occurring on or after that date; HB 1079, s. 3(a), S.L. 2020-6.)

Engaged in Business – (65). The definition of the term is further amended and defined as “[a]ny of the following:

“a. Maintaining, occupying, or using permanently or temporarily, directly or indirectly, or through a subsidiary or agent, by whatever name called, any office, place of distribution, sales or sample room, warehouse or storage place, or other place of business in this state, or permanently or temporarily, directly or through a subsidiary, having any representative, agent, sales representative, marketplace facilitator subject to the requirements of G.S. 105-164.4J, or solicitor operating or transacting business by mobile phone application or other applications in this state. The fact that any corporate retailer, agent, or subsidiary engaged in business in this state may not be legally domesticated or qualified to do business in this state is immaterial
…
e. Making marketplace-facilitated sales subject to the requirements of G.S. 105- 164.4J.” [Emphasis added.]

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(m), S.L. 2019-246.)

Entertainment Activity – (*). The definition of the term was previously codified as G.S. 105-164.4G(a)(3) and continues to be defined as “[a]n activity listed in this subdivision:

a. A live performance or other live event of any kind, the purpose of which is for entertainment. 
b. A movie, motion picture, or film. 
c. A museum, a cultural site, a garden, an exhibit, a show, or a similar attraction. 
d. A guided tour at any of the activities listed in sub-subdivision c. of this subdivision.”

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(h), S.L. 2019-246.)

Facilitator – (*). The definition of the term is added and defined as “[a]n accommodation facilitator, an admission facilitator, or a service contract facilitator.”

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(m), S.L. 2019-246.)

Livestock – (*). The definition of the term is added and defined as “[c]attle, sheep, goats, swine, horses, or mules.”

(Effective July 1, 2020, and applies to sales occurring on or after that date; HB 1079, s. 1(b), S.L. 2020-6.)

Marketplace – (*). The definition of the term is added and defined as “[a] physical or electronic place, forum, platform, application, or other method by which a marketplace seller sells or offers to sell items, the delivery of or first use of which is sourced to this state.”

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(a), S.L. 2019-246.)

Marketplace-Facilitated Sale – (*). The definition of the term is added and defined as “[t]he sale of an item by a marketplace facilitator on behalf of a marketplace seller that occurs through a marketplace.”

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(a), S.L. 2019-246.)

Marketplace Facilitator – (*). The definition of the term is added and defined as “[a] person that, directly or indirectly and whether through one or more affiliates, does both of the following:

a. Lists or otherwise makes available for sale a marketplace seller's items through a marketplace owned or operated by the marketplace facilitator. 
b. Does one or more of the following:

1. Collects the sales price or purchase price of a marketplace seller's items or otherwise processes payment. 
2. Makes payment processing services available to purchasers for the sale of a marketplace seller's items.”

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(a), S.L. 2019-246.)

Marketplace Seller – (*). The definition of the term is added and defined as “[a] person that sells or offers to sell items through a marketplace regardless of any of the following:

a. Whether the person has a physical presence in this state. 
b. Whether the person is registered as a retailer in this state. 
c. Whether the person would have been required to collect and remit sales and use tax had the sales not been made through a marketplace.
d. Whether the person would not have been required to collect and remit sales and use tax had the sales not been made through a marketplace.”

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(a), S.L. 2019-246.)

Qualifying Educational Entity – (170). The definition of the term is added and defined as “[a]n entity listed in this subdivision. For purposes of this definition, references to the United States Code mean the United States Code as enacted as of January 1, 2020. The entities are:

a. An elementary or secondary school, as defined in 20 U.S.C. § 7801. 
b. An institution of higher education, as defined in 20 U.S.C. § 1002.”

(Effective retroactively to October 1, 2019, and applies to sales occurring on or after that date; HB 1079, s. 3.(a), S.L. 2020-6.)

Retailer – (195). The definition of the term is amended and provides “[a]ny of the following persons:

a. A person engaged in business of making sales at retail, offering to make sales at retail, or soliciting sales at retail of items sourced to this state. When the Secretary finds it necessary for the efficient administration of . . . Article [5 of Chapter 105 of the North Carolina General Statutes] to regard any sales representatives, solicitors, representatives, consignees, peddlers, or truckers as agents of the dealers, distributors, consignors, supervisors, employers, or persons under whom they operate or from whom they obtain the items sold by them regardless of whether they are making sales on their own behalf or on behalf of these dealers, distributors, consignors, supervisors, employers, or persons as ‘retailers’ for the purpose of . . . Article [5 of Chapter 105 of the North Carolina General Statutes].
. . .
d. A person required to collect the state tax levied under . . . Article [5 of Chapter 105 of the North Carolina General Statutes] or the local taxes levied under Subchapter VIII of [Chapter 105 of the North Carolina General Statutes] and under Chapter 1096 of the 1967 Session Laws. 
e. A marketplace facilitator that is subject to the requirements of G.S. 105-164.4J or a facilitator that is required to collect and remit the tax under . . . Article [5 of Chapter 105 of the North Carolina General Statutes].” [Emphasis added.]

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(m), S.L. 2019-246.)

Service Contract Facilitator – (*). The definition of the term is added and defined as “[a] person who contracts with the obligor of a service contract to market the service contract and accepts payment from the purchaser for the service contract.”

The “service contract facilitator” definition is intended to replace the definition of the term “facilitator” in G.S. 105-164.4I(e) that is repealed.

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(j), S.L. 2019-246.)

Specified Digital Products – (*). The definition of the term is added and defined as “[d]igital audio works, digital audiovisual works, and digital books.”

(Effective retroactively to October 1, 2019, and applies to sales occurring on or after that date; HB 1079, s. 3(a), S.L. 2020-6.)

Transferred Electronically – (*). The definition of the term is added and defined as “[o]btained by the purchaser by means other than tangible storage media and includes delivered or accessed electronically.”

(Effective retroactively to October 1, 2019, and applies to sales occurring on or after that date; HB 1079, s. 3(a), S.L. 2020-6.)

This subsection is amended to add clarity to the sales and use tax imposition on retail sales of and the use, storage, or consumption of digital codes and provides the following:
“. . .
(1) The general rate of tax applies to the following items sold at retail:
. . .
b. The sales price of certain digital property. The tax applies regardless of whether the purchaser of the property has a right to use it permanently or to use it without making continued payments. The sale at retail or the use, storage, or consumption in this state of a digital code is treated the same as the sale at retail or the use, storage, or consumption in this state of certain digital property for which the digital code relates." [Emphasis added.]

(Effective June 30, 2020; HB 1080, s. 3.4., S.L. 2020-58.)

The subsection G.S. 105-164.4F(a) is repealed. The definition of the term “accommodation” is codified in G.S. 105-164.3. The definition of the terms “facilitator” and “rental agent” in G.S. 105-164.4F(a) are repealed. The definition of the term “accommodation facilitator” is added in G.S. 105-164.3.

These subsections are amended and provide the following:

“(b) Tax. – The gross receipts derived from the rental of an accommodation are taxed at the general rate set in G.S. 105-164.4. Gross receipts derived from the rental of an accommodation include the sales price of the rental of the accommodation. The sales price of the rental of an accommodation is determined as if the rental were a rental of tangible personal property. The sales price of the rental of an accommodation made by an accommodation facilitator includes any charges or fees, by whatever name called, charged by the accommodation facilitator to the purchaser of the accommodation that are necessary to complete the rental. The tax is due and payable by the retailer in accordance with G.S. 105-164.16.
(b1) Retailer. – Except as otherwise provided in subsection (c) of this section, the retailer of the rental of an accommodation is one or more of the persons listed below that collects the payment, or a portion of the payment, for the rental of the accommodation. In the event the person who collects the payment cannot be determined or is a third party that is not listed in this subsection, and subsection (c) of this section does not apply, the provider of the accommodation shall be considered the retailer of the transaction. The retailer is liable for reporting and remitting the tax due on the portion of the gross receipts derived from the rental of the accommodation that the retailer collects. The retailer may be one or more of the following:

(1) The provider of the accommodation. 
(2) An accommodation facilitator.

(c) Certain Accommodation Facilitator Transactions. – This subsection applies only to an accommodation facilitator that is operated by or on behalf of a hotel or a hotel corporation, that facilitates the rental of hotel accommodations solely for the hotel or the hotel corporation's owned or managed hotels and franchisees, and that collects payment, or a portion of the payment, for the rental of an accommodation. An accommodation facilitator subject to this subsection is not considered the retailer of the rental of the accommodation. The accommodation facilitator must send the retailer the tax due on the sales price, or the portion of the sales price, the accommodation facilitator collected no later than 10 days after the end of each calendar month. An accommodation facilitator that does not send the retailer the tax due on the sales price, or the portion of the sales price the accommodation facilitator collected, is liable for the amount of tax the accommodation facilitator fails to send. An accommodation facilitator is not liable for tax sent to a retailer but not remitted by the retailer to the Secretary. Tax payments received by a retailer from an accommodation facilitator are held in trust by the retailer for remittance to the Secretary. A retailer that receives a tax payment from an accommodation facilitator must remit the amount received to the Secretary. A retailer is not liable for tax due but not received from an accommodation facilitator.
(c1) Accommodation Facilitator Report. – An accommodation facilitator must file with the Secretary an annual report by March 31 of each year for the prior calendar year for accommodation rentals it makes. The annual report must be provided in electronic format and include the property owner's name, the property owner's mailing address, the physical location of the accommodation, and gross receipts information for the rentals. The report may only be used by the Secretary, and any person receiving the report, pursuant to G.S. 105-259, for tax compliance purposes.
(d) Exemptions. – The tax imposed by this section does not apply to the following:

(1) A private residence, cottage, or similar accommodation that is rented for fewer than 15 days in a calendar year unless the rental of the accommodation is made by an accommodation facilitator. 
(2) An accommodation supplied to the same person for a period of 90 or more continuous days. 
(3) An accommodation arranged or provided to a person by a school, camp, or similar entity where a tuition or fee is charged to the person for enrollment in the school, camp, or similar entity." [Emphasis added.]

G.S. 105-160A-215(c) references a city occupancy tax and is amended to conform to the accommodation rental amendments.

G.S. 105-153A-155(c) references a county occupancy tax and is amended to conform to the accommodation rental amendments.

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(e), 4(f), 4(g), S.L. 2019-246. There is no obligation to collect the sales and use tax required by this section retroactively. If any provision of this section, or the application of any provision to a person or circumstance, is held to be invalid or unconstitutional, then the remainder of this section, and the application of the provisions to any person or circumstance, shall not be affected thereby.)

The subsection G.S. 105-164.4G(a) is repealed. The definition of the term “admission charge” is codified in G.S. 105-164.3. The definition of the term “admission facilitator” is added in G.S. 105-164.3. The definition of the term “amenity” is codified in G.S. 105-164.3. The definition of the term “entertainment activity” is codified in G.S. 105-164.3. The definition of the term “facilitator” in G.S. 105- 164.4G(a) is repealed.

These subsections are amended and provide the following:

“(b) Tax. – The gross receipts derived from an admission charge to an entertainment activity are taxed at the general rate set in G.S. 105-164.4. The tax is due and payable by the retailer in accordance with G.S. 105-164.16. For purposes of the tax imposed by this section, the retailer is the applicable person listed below: 
(1) The operator of the venue where the entertainment activity occurs, unless the retailer and the admission facilitator have a contract between them allowing for dual remittance, as provided in subsection (d) of this section. 
(2) The person that provides the entertainment and that receives admission charges directly from a purchaser. 
(3) A person other than a person listed in subdivision (1) or (2) of this subsection that receives gross receipts derived from an admission charge sold at retail.

(c) Admission Facilitator. – An admission facilitator must report to the retailer with whom it has a contract the admission charge a consumer pays to the admission facilitator for an entertainment activity. The admission facilitator must send the retailer the portion of the gross receipts the admission facilitator owes the retailer and the tax due on the gross receipts derived from an admission charge no later than 10 days after the end of each calendar month. An admission facilitator that does not send the retailer the tax due on the gross receipts derived from an admission charge is liable for the amount of tax the admission facilitator fails to send to the retailer. An admission facilitator is not liable for tax sent to a retailer but not remitted by the retailer to the Secretary. Tax payments received by a retailer from an admission facilitator are held in trust by the retailer for remittance to the Secretary. A retailer that receives a tax payment from an admission facilitator must remit the amount received to the Secretary. A retailer is not liable for tax due but not received from an admission facilitator. The requirements imposed by this subsection on a retailer and an admission facilitator are considered terms of the contract between the retailer and the admission facilitator.

(d) Dual Remittance. – The tax due on the gross receipts derived from an admission charge may be partially reported and remitted to the operator of the venue for remittance to the Department and partially reported and remitted by the admission facilitator directly to the Department. The portion of the tax not reported and remitted to the operator of the venue must be reported and remitted directly by the admission facilitator to the Department. An admission facilitator that elects to remit tax under the dual remittance option is required to obtain a certificate of registration in accordance with G.S. 105-164.29. An admission facilitator is subject to the provisions of Article 9 of . . . Chapter [105 of the North Carolina General Statutes.” [Emphasis added.]

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(i), S.L. 2019-246.)

This subsection is amended to include the defined term “service contract facilitator” and provides the following:

“(a) Tax. – The sales price of or the gross receipts derived from a service contract or the renewal of a service contract sold at retail is subject to the general rate of tax set in G.S. 105-164.4 and is sourced in accordance with the sourcing principles in G.S. 105-164.4B. The retailer of a service contract is required to collect the tax due at the time of the retail sale of the contract and is liable for payment of the tax. The tax is due and payable in accordance with G.S. 105-164.16. The retailer of a service contract is the applicable person listed below:

(1) When a service contract is sold at retail to a purchaser by the obligor under the contract, the obligor is the retailer. 
(2) When a service contract is sold at retail to a purchaser by a service contract facilitator on behalf of the obligor under the contract, the service contract facilitator is the retailer unless the provisions of subdivision (3) of this subsection apply. 
(3) When a service contract is sold at retail to a purchaser by a service contract facilitator on behalf of the obligor under the contract and there is an agreement between the service contract facilitator and the obligor that states the obligor will be liable for the payment of the tax, the obligor is the retailer. The service contract facilitator must send the retailer the tax due on the sales price of or gross receipts derived from the service contract no later than 10 days after the end of each calendar month. A service contract facilitator that does not send the retailer the tax due on the sales price or gross receipts is liable for the amount of tax the service contract facilitator fails to send. A service contract facilitator is not liable for tax sent to a retailer but not remitted by the retailer to the Secretary. Tax payments received by a retailer from a service contract facilitator are held in trust by the retailer for remittance to the Secretary. A retailer that receives a tax payment from a service contract facilitator must remit the amount received to the Secretary. A retailer is not liable for tax due but not received from a service contract facilitator. The requirements imposed by this subdivision on a retailer and a service contract facilitator are considered terms of the agreement between the retailer and the service contract facilitator.”

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4.(k), S.L. 2019-246. There is no obligation to collect the sales and use tax required by this section retroactively. If any provision of this section, or the application of any provision to a person or circumstance, is held to be invalid or unconstitutional, then the remainder of this section, and the application of the provisions to any person or circumstance, shall not be affected thereby.)

This subsection is repealed. The definition of the term “service contract facilitator” is codified in G.S. 105-164.3.

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4.(k), S.L. 2019-246.)

This section is added and provides the following:

“(a) Scope. – This section applies to a marketplace facilitator that makes sales, including all marketplace-facilitated sales for all marketplace sellers, sourced to this state for the previous or the current calendar year that meet either of the following: 
(1) Gross sales in excess of one hundred thousand dollars ($100,000). 
(2) Two hundred or more separate transactions.

(b) Payment of Tax. – A marketplace facilitator that meets the threshold in subsection (a) of this section is considered the retailer of each marketplace-facilitated sale it makes and is liable for collecting and remitting the sales and use tax on all such sales. A marketplace facilitator is required to comply with the same requirements and procedures as all other retailers registered or who are required to be registered to collect and remit sales and use tax in this state. A marketplace facilitator is required to collect and remit sales tax as required by this section regardless of whether a marketplace seller for whom it makes a marketplace-facilitated sale meets any of the following conditions:

(1) Has a physical presence in this state. 
(2) Is required to be registered to collect and remit sales and use tax in this state.
(3) Would have been required to collect and remit sales and use tax in this state had the sale not been made through a marketplace. 
(4) Would not have been required to collect and remit sales and use tax in this state had the sale not been made through a marketplace.

(c) Report. – A marketplace facilitator must provide or make available to each marketplace seller the information listed in this subsection with respect to marketplace-facilitated sales that are made on behalf of the marketplace seller and that are sourced to this state. The information may be provided in any format and shall be provided or made available no later than 10 days after the end of each calendar month. The required information to be provided or made available to each marketplace seller is as follows:

(1) Gross sales. 
(2) The number of separate transactions.

(d) Liability Relief. – The Department shall not assess a marketplace facilitator for failure to collect the correct amount of tax due if the marketplace facilitator can demonstrate to the Secretary's satisfaction that all of the circumstances listed in this subsection apply. This subsection does not apply with regard to a marketplace-facilitated sale for which the marketplace facilitator is the marketplace seller or if the marketplace facilitator and the marketplace seller are affiliates. If a marketplace facilitator is not assessed for tax due under this section, the marketplace seller is liable for the tax due under this section provided the marketplace seller is engaged in business in this state. The circumstances that a marketplace facilitator must demonstrate are as follows:

(1) The failure to collect the correct amount of tax was due to incorrect information given to the marketplace facilitator by the marketplace seller. 
(2) The marketplace facilitator did not receive specific written advice from the Secretary for the transaction at issue.

(e) Refund of Tax. – If a purchaser receives a refund on any portion of the sales price from a marketplace facilitator who collected and remitted the tax on the retail sale, the provisions of G.S. 105-164.11A(a) apply.
(f) Class Actions. – No class action may be brought against a marketplace facilitator in any court of this state on behalf of customers arising from or in any way related to an overpayment of sales or use tax collected on facilitated sales by a marketplace facilitator, regardless of whether that claim is characterized as a tax refund claim. Nothing in this subsection affects a customer's right to seek a refund as provided under G.S. 105-164.11.
(g) Agreements. – Nothing in this section shall be construed to interfere with the ability of a marketplace facilitator and a marketplace seller to enter into an agreement with each other regarding the fulfillment of the requirements of . . . Article [5 of Chapter 105 of the North Carolina General Statutes], except that an agreement may not require a marketplace seller to collect and remit sales and use tax on marketplace-facilitated sales.
(h) Use Tax Obligation. – Nothing in this section affects the obligation of any purchaser to remit use tax for any taxable transaction for which a marketplace facilitator does not collect and remit sales or use tax. 
(i) Limitation. – This section does not apply to an accommodation facilitator, an admission facilitator, or a service contract facilitator whose collection and remittance requirements are set out in G.S. 105-164.4F, 105-164.4G, and 105-164.4I, respectively."

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4.(c), S.L. 2019-246. There is no obligation to collect the sales and use tax required by this section retroactively. If any provision of this section, or the application of any provision to a person or circumstance, is held to be invalid or unconstitutional, then the remainder of this section, and the application of the provisions to any person or circumstance, shall not be affected thereby.)

This section is amended by adding a new subsection and provides the following:
. . .
“(j) Grace Period. - The Department shall take no action to assess a person for any tax due for a filing period beginning on or after February 1, 2020, and ending prior to October 1, 2020, with respect to any of the circumstances listed in this subsection. This subsection does not apply to (i) a person that received specific written advice from the Secretary for the transactions at issue for the laws in effect for the applicable period, (ii) a person that collected tax and failed to remit it to the Department, or (iii) the retail sale of inventory that was held for resale. The applicable circumstances are:
(1) The person sells tangible personal property on behalf of the owner of the tangible personal property, or the owner's estate, whether by auction or through the pricing of items, and the sale was conducted at the owner's home or farm.
(2) The person sells fixtures and equipment held for use in operating a retail or wholesale business on behalf of a business, whether by auction or through the pricing of items, and the sale is conducted at the business location.”

(Effective June 5, 2020; HB 1079, s. 1.(d), S.L. 2020-6.)

This section is further amended to update the language and provides the following:

“(a) Scope. – This section applies to a marketplace facilitator engaged in business in this state. [The marketplace facilitator thresholds are repealed in this subsection, but the thresholds are still referenced in G.S. 105-164.8(b)(9).]
(b) Payment of Tax. – A marketplace facilitator subject to this section is considered the retailer of each marketplace-facilitated sale it makes and is liable for collecting and remitting the sales and use tax on all such sales. A marketplace facilitator is required to comply with the same requirements and procedures as all other retailers registered or who are required to be registered to collect and remit sales and use tax in this state. A marketplace facilitator is required to collect and remit sales tax as required by this section regardless of whether a marketplace seller for whom it makes a marketplace-facilitated sale meets any of the following conditions:
. . .” [Emphasis added.]

(Effective July 1, 2020, and applies to sales occurring on or after that date; HB 1080, s. 3.3.(a), S.L. 2020-58.)

This subdivision is amended and provides “[a] retailer who makes a remote sale is engaged in business in this state and is subject to tax levied under . . . Article [5 of Chapter 105 of the North Carolina General Statutes] if at least one of the following conditions is met:
. . .
(3) The retailer solicits or transacts business in this state by employees, independent contractors, agents, or other representatives, whether the remote sales subject to taxation by this state result from or are related in any other way to 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 person of this state under which the person, 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. This presumption applies only if the cumulative gross receipts from sales by the retailer to purchasers in this state who are referred to the retailer by all persons 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 person 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.” [Emphasis added.]

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(b), S.L. 2019-246.)

This subdivision is amended and provides “[t]he retailer makes remote sales sourced to this state, including sales as a marketplace seller, for the previous or the current calendar year that meet either of the following:

a. Gross sales in excess of one hundred thousand dollars ($100,000). 
b. Two hundred or more separate transactions.” [Emphasis added.]

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(b), S.L. 2019-246.)

This subdivision is added and provides “[t]he retailer is a marketplace facilitator that makes sales, including all marketplace-facilitated sales for all marketplace sellers, sourced to this state for the previous or the current calendar year that meet either of the following: 
a. Gross sales in excess of one hundred thousand dollars ($100,000). 
b. Two hundred or more separate transactions."

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(b), S.L. 2019-246. There is no obligation to collect the sales and use tax required by this section retroactively. If any provision of this section, or the application of any provision to a person or circumstance, is held to be invalid or unconstitutional, then the remainder of this section, and the application of the provisions to any person or circumstance, shall not be affected thereby.)

The 2019 and 2020 General Assembly repealed, added, amended, and enacted clarifying changes to the exemptions from sales and use tax. The changes and their effective dates are as follows:

Sales of equipment . . . – (5o). This subdivision is amended and expands an exemption from sales and use tax on “[s]ales of equipment, or an accessory, an attachment, or a repair part for equipment that meets all of the following requirements:

a. Is sold to a large fulfillment facility or to a contractor or subcontractor if the purchase is for use in the performance of a contract with the large fulfillment facility. 

b. Is used at the facility for any of the following purposes: 
1. In the distribution process, which includes receiving, inventorying, sorting, repackaging, or distributing finished retail products. 
2. Baling previously used packaging for resale, sanitizing required by federal law, or material handling. 

c. Is not electricity.

If the level of investment or employment required by G.S. 105-164.3(97)b. is not timely made, achieved, or maintained, then the exemption provided under this subdivision is forfeited. If the exemption is forfeited due to a failure to timely make the required investment or to timely achieve the minimum required employment level, then the exemption provided under this subdivision is forfeited on all purchases. If the exemption is forfeited due to a failure to maintain the minimum required employment level once that level has been achieved, then the exemption provided under this subdivision is forfeited for those purchases occurring on or after the date the taxpayer fails to maintain the minimum required employment level. A taxpayer that forfeits an exemption under this subdivision is liable for all past sales and use taxes avoided as a result of the forfeiture, computed at the applicable state and local rates from the date the taxes would otherwise have been due, plus interest at the rate established under G.S. 105-241.21. Interest is computed from the date the sales or use tax would otherwise have been due. The past taxes and interest are due 30 days after the date of forfeiture. A taxpayer that fails to pay the past taxes and interest by the due date is subject to the provisions of G.S. 105-236.” [Emphasis added.]

(Effective July 1, 2020, and applies to sales occurring on or after that date; HB 1079, s. 2(a), S.L. 2020-6.)

Note: Refund. – A large fulfillment facility is allowed a refund of all North Carolina state and local sales and use taxes paid by the large fulfillment facility, or paid by a contractor or subcontractor on the large fulfillment facility’s behalf, for purchases of items eligible for exemption under G.S. 105-164.13(5o), as amended by this section, if the purchase was made on or after April 1, 2020, but before July 1, 2020. A request for a refund under this section must be in writing and must include any information and documentation required by the Secretary. A request for a refund under this section must be made on or after July 1, 2020, and is due before October 1, 2020. A refund allowed under this section is not an overpayment of tax and does not accrue interest as provided in G.S. 105-241.21.

(Effective June 5, 2020; HB 1079, s. 2(b), S.L. 2020-6.)

Sales of a digital audio work or digital audiovisual work . . . to the operator of a home school . . . – (72). This subdivision is added and provides an exemption from sales and use tax on “[s]ales of a digital audio work or a digital audiovisual work that is a qualifying education expense under G.S. 115C-595(a)(3) to the operator of a home school as defined in G.S. 115C-563.”

(Effective retroactively to October 1, 2019, and applies to sales occurring on or after that date; HB 1079, s. 3(b), S.L. 2020-6.)

Sales of a digital audio work or digital audiovisual work that consists of nontaxable service content . . . occurring contemporaneously – (73). This subdivision is added and provides an exemption from sales and use tax on “[s]ales of a digital audio work or digital audiovisual work that consists of nontaxable service content when the electronic transfer of the digital audio work or digital audiovisual work occurs contemporaneously with the provision of the nontaxable service in real time.”

(Effective retroactively to October 1, 2019, and applies to sales occurring on or after that date; HB 1079, s. 3(b), S.L. 2020-6.)

The following subsection is amended as follows:

This subsection is amended and provides an exemption from sales and use tax on the following purchases by a qualified farmer or conditional farmer if used primarily in farming operations:
. . .
“(7) Any of the following animals: 
a. Baby chicks and poults.
b. Livestock."

(Effective July 1, 2020, and applies to sales occurring on or after that date; HB 1079, s. 1.(a), S.L. 2020-6.)

This section is amended to replace the terms “tangible personal property” and “services” with the defined term “items” and provides the following:
“. . .
(b) Nonprofit Entities and Hospital Drugs. – A nonprofit entity is allowed a semiannual refund of sales and use taxes paid by it under . . . Article [5 of Chapter 105 of the North Carolina General Statutes] on direct purchases of items for use in carrying on the work of the nonprofit entity. Sales and use tax liability indirectly incurred by a nonprofit entity through reimbursement to an authorized person of the entity for the purchase of tangible personal property and services for use in carrying on the work of the nonprofit entity is considered a direct purchase by the entity. Sales and use tax liability indirectly incurred by a nonprofit entity on building materials, supplies, fixtures, and equipment that become a part of or annexed to any building or structure that is owned or leased by the nonprofit entity and is being erected, altered, or repaired for use by the nonprofit entity for carrying on its nonprofit activities is considered a sales or use tax liability incurred on direct purchases by the nonprofit entity. The refund allowed under this subsection does not apply to purchases of electricity, telecommunications service, ancillary service, piped natural gas, video programming, or a prepaid meal plan. A request for a refund must be in writing and must include any information and documentation required by the Secretary. A request for a refund for the first six months of a calendar year is due the following October 15; a request for a refund for the second six months of a calendar year is due the following April 15. The aggregate annual refund amount allowed an entity under this subsection for the state's fiscal year may not exceed thirty-one million seven hundred thousand dollars ($31,700,000).

The refunds allowed under this subsection do not apply to an entity that is owned and controlled by the United States or to an entity that is owned or controlled by the state and is not listed in this subsection. A hospital that is not listed in this subsection is allowed a semiannual refund of sales and use taxes paid by it on over-the-counter drugs purchased for use in carrying out its work. The following nonprofit entities are allowed a refund under this subsection:
…
(c) Certain Governmental Entities. – A governmental entity listed in this subsection is allowed an annual refund of sales and use taxes paid by it. Article [5 of Chapter 105 of the North Carolina General Statutes] on direct purchases of items. Sales and use tax liability indirectly incurred by a governmental entity on building materials, supplies, fixtures, and equipment that become a part of or annexed to any building or structure that is owned or leased by the governmental entity and is being erected, altered, or repaired for use by the governmental entity is considered a sales or use tax liability incurred on direct purchases by the governmental entity for the purpose of this subsection. The refund allowed under this subsection does not apply to purchases of electricity, telecommunications service, ancillary service, piped natural gas, video programming, or a prepaid meal plan. A request for a refund must be in writing and must include any information and documentation required by the Secretary. A request for a refund is due within six months after the end of the governmental entity's fiscal year.
This subsection applies only to the following governmental entities:
. . .” [Emphasis added.]

The effect is that certain digital property is refundable.

(Effective July 1, 2020, and applies to purchases made on or after that date; HB 1080, s. 3.1.(a), S.L. 2020-58.)

This section is amended to remove unnecessary language and provides the following:

“(d) Use Tax on Purchases. – Use tax payable by an individual who purchases an item, other than a boat or aircraft, for a nonbusiness purpose is due on an annual basis. For an individual who is not required to file an individual income tax return under Part 2 of Article 4 of . . . [Chapter 105 of the North Carolina General Statutes] , the annual reporting period ends on the last day of the calendar year and a use tax return is due by the following April 15. For an individual who is required to file an individual income tax return, the annual reporting period ends on the last day of the individual's income tax year, and the use tax must be paid on the income tax return as provided in G.S. 105-269.14."

(Effective June 30, 2020; HB 1080, s. 3.2., S.L. 2020-58.)

This section is amended and provides the following:

“(a) Record Keeping Generally. – Retailers, wholesale merchants, facilitators, real property contractors, and consumers must keep records that establish their tax liability under . . . Article [5 of Chapter 105 of the North Carolina General Statutes]. The Secretary or a person designated by the Secretary may inspect these records at any reasonable time during the day.
(b) Retailers. – A retailer's records must include records of the retailer's gross income, gross sales, net taxable sales, all items purchased for resale, and any reports or records related to transactions with a facilitator with whom it has a contract as provided in . . . Article [5 of Chapter 105 of the North Carolina General Statutes]. Failure of a retailer to keep records that establish a sale is exempt under . . . Article [5 of Chapter 105 of the North Carolina General Statutes] subjects the retailer to liability for tax on the sale.
(c) Wholesale Merchants. – A wholesale merchant's records must include a bill of sale for each customer that contains the name and address of the purchaser, the date of the purchase, the item purchased, and the sales price of the item. A wholesale merchant must also keep records that establish a sale is exempt from tax and any reports or records related to transactions with a facilitator with whom it has a contract as provided in . . . Article [5 of Chapter 105 of the North Carolina General Statutes]. Failure of a wholesale merchant to keep records that establish a sale is exempt from tax under . . . Article [5 of Chapter 105 of the North Carolina General Statutes] subjects the wholesale merchant to liability for tax at the rate that applies to the retail sale of the item.
(d) Facilitators. – A facilitator's records must include records of the facilitator's gross income, gross sales, net taxable sales, all items purchased for resale, any reports or records related to transactions with a retailer with whom it has a contract as provided in . . . Article [5 of Chapter 105 of the North Carolina General Statutes], and any other records that establish its tax liability. Failure of a facilitator to keep records that establish a sale is exempt from tax under . . . Article [5 of Chapter 105 of the North Carolina General Statutes] subjects the facilitator to liability for tax on the sale.
(e) Real Property Contractors. – A real property contractor's records must include substantiation that a transaction is a real property contract or a mixed transaction contract pursuant to G.S. 105-164.4H(a1). Failure of a real property contractor to keep records that establish a real property contract under . . . Article [5 of Chapter 105 of the North Carolina General Statutes] subjects the real property contractor to liability for tax on the sale.
(f) Consumers. – A consumer's records must include an invoice or other statement of the purchase price of an item the consumer purchased from inside or outside the state and any sales and use tax paid thereon.

Failure of the consumer to keep these records subjects the consumer to liability for tax on the purchase price of the item, as determined by the Secretary." [Emphasis added.]

(Effective February 1, 2020, and applies to sales occurring on or after that date; SB 557, s. 4(l), S.L. 2019-246.)

This subdivision is added and provides “[t]he Secretary may compromise a taxpayer's liability for a tax that is collectible under G.S. 105-241.22 when the Secretary determines that the compromise is in the best interest of the state and makes one or more of the following findings:
. . .
(9) The taxpayer is an auctioneer licensed under Chapter 85B of the General Statutes, and the assessment is for sales tax that the taxpayer failed to collect for the sale of livestock at auction. The Secretary must determine that the taxpayer has made a good-faith effort to comply with the tax laws, including being registered as a retailer on or before July 1, 2020. This subdivision applies to assessments for any tax due for a reporting period ending prior to July 1, 2020. This subdivision does not apply if the person received specific written advice from the Secretary for the transactions at issue for the laws in effect for the applicable period or for tax collected and not remitted to the Department.”*

(Effective June 5, 2020; HB 1079, s. 1(c), S.L. 2020-6.)

This section is added and provides “’[t]he Department shall take no action to assess a person for any sales and use tax due for a filing period beginning on or after October 1, 2019, and ending prior to August 1, 2020, with respect to the retail sale of digital audio works or digital audiovisual that meet either of the conditions listed in this section. This section does not apply to a person that received specific written advice from the Secretary for the transactions at issue for the laws in effect for the applicable period or to a person that collected tax and failed to remit it to the Department. The conditions are:

(1) The digital audio works or digital audiovisual works consist of continuing education instruction approved by an occupational licensing board.
(2) The digital audio works or digital audiovisual works consist of professional development instruction for school board members, administrators, or staff.”

(Effective June 5, 2020; HB 1079, s. 3(d), S.L. 2020-6.)

This section was added and provides that the “[t]he Department shall take no action to assess a person for any sales and use tax due for a filing period beginning on or after October 1, 2019, and ending prior to August 1, 2020, with respect to the retail sale of digital audio works or digital audiovisual works that meet either of the conditions listed in this section. This section does not apply to a person that received specific written advice from the Secretary for the transactions at issue for the laws in effect for the applicable period or to a person that collected tax and failed to remit it to the Department. The conditions are:

(1) The digital audio works or digital audiovisual works consist of continuing education instruction approved or required by an occupational licensing board. 
(2) The digital audio works or digital audiovisual works consist of professional development instruction for school board members, administrators, or staff." [Emphasis added.]

(Effective June 30, 2020; HB 1080, s. 3.6., S.L. 2020-58.)