Haywood County could see a slight boost in sales tax this year following a state crack-down on online purchases.
Online shopping was once a safe haven from sales tax, but as internet sales have grown, the state has been casting a wider net to collect sales tax from online purchases.
The latest change came in November, when the state mandated that any online shopping site with more than $100,000 in sales or more than 200 transactions in a year must now collect and remit state sales tax.
The move has been lauded for leveling the playing field for brick-and-mortar stores.
“Main Street retailers that employ your neighbors, pay property tax and support the little league team and high school band have long been required to collect sales tax that online stores did not, putting them at an automatic disadvantage,” said Andy Ellen, president and general counsel of the N.C. Retail Merchants Association.
The change is expected to net an additional $400 million annually in sales tax for the state. Haywood County should likewise see a slight boost in its local share of sales tax.
A cut of the state sales tax comes back to the county of origin where the purchase was made — 2.25 percent out the 7 percent sales tax.
If you do your shopping locally, Haywood County gets the local sales tax cut. If you do your shopping in Asheville, however, Buncombe County gets it.
Sales tax for online purchases works the same way — it is based on the buyer’s shipping address.
North Carolina isn’t alone in the struggle to capture sales tax from online purchases. The trend has played out across the country, resulting in a federal lawsuit last year over whether online purchases should be subject to state sale tax.
The lawsuit paved the way for North Carolina to widen its online sales tax net. Until the change, only online sellers with a physical presence in the state were subject to sales tax. If you bought a TV online from Best Buy, since Best Buy also has bricks-and-mortar stores in the state, sales tax applied. The same was true of Amazon, since it has shipping warehouses in the state.
The lawsuit changed the definition of what counted as a “substantial presence” in the state, however. It now includes companies that do more than $100,000 in sales or 200 transactions in the state annually, regardless of whether they also have a physical presence. The new requirement went into effect in November, just in time for the holiday shopping season.
Until the latest change, only online sales by companies with a physical presence in the state had to pay sales tax.
“This decision will reinstate some equity into our economy rather than continuing to reward companies with an unfair advantage as they compete with North Carolina businesses while contributing nothing to North Carolina’s economy,” said Ellen with the N.C. Retail Merchants Association.