North Carolina enacts market-based sourcing and marketplace rules

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November 2019


North Carolina has enacted legislation adopting corporate income tax market-based sourcing rules, amending the franchise tax on holding companies, imposing marketplace facilitator sales tax obligations, and amending accommodation rental provisions, among other changes. [S.B. 557, enacted 11/8/19]

The takeaway

North Carolina has come close to implementing market-based sourcing in the past, including actually enacting such provisions but ultimately pulling back from implementing them. In light of the newly enacted legislation, taxpayers should pay special attention to the nuances of the special industry apportionment rules, if applicable, as well as the opportunity to elect an income producing activities sourcing approach to utilize losses. Taxpayers also should be aware of the potentially broad reach of the sales tax marketplace provisions, as these rules impact not only facilitators, but also sellers and, indirectly, purchasers.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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