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New NC Tax Law Changes

The North Carolina General Assembly recently passed Senate Bill 557, Various Finance Law Changes, and the governor signed it into law on November 8, 2019. The bill includes several changes affecting NC taxes, including the following:

• A 7.5% increase to NC’s standard deduction for individual taxpayers, effective for the 2020 tax year.

• Enactment of market-based sourcing for companies selling products, services or intangibles to customers in multiple states, effective for tax years starting January 1, 2020. While it may seem obvious whether a sale is a NC sale or should be assigned to another state, properly sourcing a sale has become increasingly difficult in our mobile and technology-enabled economy.

To further complicate matters, each state maintains its own rules on sourcing sales, despite some constraints offered by Federal law. Companies, particularly service providers and those providing intangible assets, with customers in multiple states will need to consider the impact of this change on the allocation of their state income tax obligations. NC joins approximately 30 other states in adopting this provision.

• Imposition of sales tax on marketplace facilitators. A marketplace facilitator is someone that contracts with sellers to promote and sell their products for them, often online. For example, Amazon is a well-known marketplace facilitator because they promote and sell products made by other companies.

Effective February 1, 2020, marketplace facilitators with NC sales exceeding $100,000 or 200 separate transactions will be required to charge NC sales tax when appropriate. Companies currently using marketplace facilitators for their business may experience a change in the facilitator’s practices for charging sales tax on or before this law goes into effect.

• Department of Revenue required to update its systems for copying powers of attorney on various tax communications. While CPAs and attorneys must secure a power of attorney to interact with the Department on a taxpayer’s behalf, the Department has long contended that their systems do not allow them to automatically send copies of notices and communications to those representatives. This often results in delays in resolving tax matters and missed response deadlines. The Department is required to report its progress on this effort to the General Assembly by January 31, 2020.

If you have questions about these or other provisions of this new law, please let us know.

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