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PART II: OTHER LEGISLATIVE CHANGES

Effective June 20, 2012

Extension of Economic Incentive Refunds

Various economic incentive refunds originally scheduled to be repealed for purchases made on or after January 1,

2013, have been extended and are repealed for purchases made on or after January 1, 2014. These include:

Refunds for Passenger Air Carrier (G.S. 105-164.14A(a)(1)); Refunds for a Business in a Low-Tier Area (G.S.

105-164.14A(a)(3)); Refunds for Motorsports Team or Sanctioning Body (G.S. 105-164.14A(a)(4)); Refunds

for Analytical Services Business (G.S. 105-164.14A(a)(6)); and Refunds for Certain Industrial Facilities (G.S.

105-164.14B(f)).

Effective June 26, 2012, Except as Otherwise Noted

Over-the-Counter-Drug

G.S. 105-164.3(25a) is amended to conform to the Streamlined Sales and Use Tax Agreement. The definition of

an over-the-counter drug is “[a] drug that contains a label that identifies the product as a drug as required by 21.

C.F.R. § 201.66. The label includes either of the following: a. A ‘Drugs Facts’ panel. b. A statement of its active

ingredients with a list of those ingredients contained in the compound, substance, or preparation.”

Prepaid Calling Service and Prepaid Wireless Calling Service

G.S. 105-164.3(26b) and G.S. 105-164.3(27a) are amended to add the word “predetermined” such that the statutes

now reference “predetermined units or dollars whose number or dollar value declines with use and is known on a

continuous basis.”

Sale or Selling

G.S. 105-164.3(36) is amended to define sale or selling as the “transfer for consideration of title, license to use or

consume, or possession of tangible personal property or digital property or the performance for consideration of a

service.” The definition was amended to include the phrase “license to use or consume” which is included in the

definition of “purchase.”

General Sourcing Principles

G.S. 105-164.4B(a), as rewritten, conforms the State’s general principles for the sourcing of the sales of products to

the sourcing requirements of the Streamlined Sales and Use Tax Agreement as amended December 19, 2011.

Pursuant to the rewritten provisions of G.S. 105-164.4B(a), sourcing applies as follows regardless of the nature of

the product with specific exceptions noted in the general statutes for periodic rental payments, transportation

equipment, telecommunications services, direct mail, and florist wire sales:

1. When a purchaser receives a product at a business location of the seller, the sale is sourced to

that business location.

2. When a purchaser or purchaser’s donee receives a product at a location specified by the

purchaser and the location is not a business location of the seller, the sale is sourced to the

location where the purchaser or the purchaser’s donee receives the product.

3. When (1) and (2) do not apply, the sale is sourced to the location indicated by an address for the

purchaser that is available from the business records of the seller that are maintained in the

ordinary course of the seller’s business when use of this address does not constitute bad faith.

4. When (1), (2), and (3) do not apply, the sale is sourced to the location indicated by an address for

the purchaser obtained during the consummation of the sale, including the address of a

purchaser’s payment instrument, if no other address is available, when use of this address does

not constitute bad faith.

5. When (1), (2), (3), and (4) do not apply, including the circumstance in which the seller is without

sufficient information to apply the rules, the location will be determined based on either (a) the

address from which tangible personal property was shipped, (b) the address from which the digital

good or the computer software delivered electronically was first available for transmission by the

seller or (c) the address from which the service was provided.

Retailer to Collect Sales Tax from Purchaser as Trustee for State

G.S. 105-164.7 is amended to clarify when the sales tax must be stated and charged separately. The statute

provides that sales tax is intended to be passed on to the purchaser of a taxable item and borne by the purchaser

instead of by the retailer. A retailer must collect the tax due on an item when the item is sold at retail. The tax is a

debt from the purchaser to the retailer until paid and is recoverable at law by the retailer in the same manner as

other debts. A retailer is considered to act as a trustee on behalf of the State when it collects tax from the

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Instructions For Form E-505 - Tax Law Changes - North Carolina Department Of Revenue - 2012 Page 2

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