In Private Letter Ruling 2020-14, the North Carolina Department of Revenue determined that an information technology company’s managed services – maintaining and monitoring its clients’ network equipment and software – were subject to sales and use tax. The taxpayer’s Terms of Use, which sets the scope of its services, qualified as a taxable service
North Carolina
North Carolina issues summary of 2020 sales and use tax changes
The North Carolina Department of Revenue issued its annual overview of this year’s legislative changes to sales and use taxes that affect various products and services, such as digital goods, marketplaces, and marketplace-facilitated sales.
North Carolina Extends and Clarifies Sales Tax Rules
On June 30, the North Carolina Governor signed into law a wide-ranging tax bill that includes marketplace facilitator rules for meals taxes and clarifies sales tax for download codes. HB 1080 extends marketplace facilitator collection and remittance obligations to local meals taxes, effective July 1, 2020. In addition, the law clarifies that the sale of…
Pump the Brakes: North Carolina Supreme Court Determines that Brake-Pad Manufacturer Does Not Qualify for Special Apportionment Rule for Public Utilities
The North Carolina Supreme Court affirmed a lower court decision that held that a manufacturer of brake pads used by railroads did not qualify for an exception to the state’s standard three-factor apportionment formula that allows “public utilities” to instead apportion their income using a single-sales factor formula.
In February 2019, the North Carolina Superior…
North Carolina Excludes Sales of Certain Digital Goods from Sales and Use Taxes
On June 5, 2020, Governor Cooper signed HB 1079, which will exclude sales of certain digital audio and visual works from the state’s sales and use tax, and make other tax changes. The law exempts sales of digital educational services and the sales of digital audio or digital audiovisual works that consist of nontaxable…
North Carolina Legislature Approves Sales and Use Tax Exclusion for Digital Educational Services
North Carolina HB 1079, providing a variety of sales tax changes, has been approved by both houses of the legislature and now awaits the Governor’s signature. In particular, the bill would exclude from sales and use tax sales of digital educational services and would exempt: (1) sales to home school operators of digital audio…
Proposed Legislation in North Carolina May Mitigate Tax on State Incentives
The North Carolina legislature has introduced S.B. 622, which would make significant changes to a wide range of North Carolina taxes.
Among those changes, the legislation would allow a deduction, to the extent included in federal taxable income, for amounts received from specified economic incentive programs in North Carolina—the Job Maintenance and Capital Development…
North Carolina Supreme Court Decides in Favor of Taxpayer in Trust Nexus Dispute
The North Carolina Supreme Court recently held that the presence in the state of a trust’s beneficiary is not sufficient to establish income tax nexus for the trust. In the Kimberly Rice Kaestner 1992 Family Trust case, the trust’s beneficiaries were residents of North Carolina. There were no other connections between the state and the…
North Carolina Supreme Court Determines that Bank’s Market Discount Income Is Not Deductible as Interest
By Liz Cha and Open Weaver Banks
The North Carolina Supreme Court affirmed the North Carolina Business Court’s decision that Fidelity Bank was precluded from deducting “market discount income” from US bonds for North Carolina corporate income tax purposes. Fidelity Bank acquired US government bonds at a discount, held these bonds until maturity, and earned…
Keep It in the Family: North Carolina Appellate Court Finds Taxation of Trust Violates Due Process
By Ted Friedman and Madison Barnett
The North Carolina Court of Appeals held that it would violate Due Process to impose income tax on an out-of-state inter vivos trust because the trust lacked a sufficient connection with North Carolina. The trust was created and governed by laws outside of North Carolina, the Trustee resided outside…