North Carolina § 105-164 - 4B. Sourcing principles.

§ 105-164. 4B. Sourcing principles.

General Principles. - The following principles apply in determining where to source the sale of an item for the seller's purpose and do not alter the application of the tax imposed under G.S. 105-164.6. Except as otherwise provided in this section, a service is sourced where the purchaser can potentially first make use of the service. These principles apply regardless of the nature of the item, except as otherwise noted in this section: When a purchaser receives an item at a business location of the seller, the sale is sourced to that business location. When a purchaser or purchaser's donee receives an item 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 item. When subdivisions (1) and (2) of this subsection 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. When subdivisions (1), (2), and (3) of this subsection 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. When subdivisions (1), (2), (3), and (4) of this subsection 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 the following: Address from which tangible personal property was shipped, Address from which the digital good or the computer software delivered electronically was first available for transmission by the seller, or Address from which the service was provided. Periodic Rental Payments. - When a lease or rental agreement requires recurring periodic payments, the payments are sourced as follows: For leased or rented property, the first payment is sourced in accordance with the principles set out in subsection (a) of this section and each subsequent payment is sourced to the primary location of the leased or rented property for the period covered by the payment. This subdivision applies to all property except a motor vehicle, an aircraft, transportation equipment, and a utility company railway car. For leased or rented property that is a motor vehicle or an aircraft but is not transportation equipment, all payments are sourced to the primary location of the leased or rented property for the period covered by the payment. For leased or rented property that is transportation equipment, all payments are sourced in accordance with the principles set out in subsection (a) of this section. For a railway car that is leased or rented by a utility company and would be transportation equipment if it were used in interstate commerce, all payments are sourced in accordance with the principles set out in subsection (a) of this section. Transportation Equipment Defined. - As used in the section, the term "transportation equipment" means any of the following used to carry persons or property in interstate commerce: a locomotive, a railway car, a commercial motor vehicle as defined in G.S. 20-4.01, or an aircraft. The term includes a container designed for use on the equipment and a component part of the equipment. Exceptions. - This section does not apply to the following: Telecommunications services. - Telecommunications services are sourced in accordance with G.S. 105-164.4C. Direct mail. - Direct mail is sourced in accordance with G.S. 105-164.4E. Florist wire sale. - A florist wire sale is sourced to the business location of the florist that takes an order for the sale. A "florist wire sale" is a sale in which a retail florist takes a customer's order and transmits the order to another retail florist to be filled and delivered. Accommodations. - The rental of an accommodation, as defined in G.S. 105-164.4F, is sourced to the location of the accommodation. Certain Digital Property. - A purchaser receives certain digital property when the purchaser takes possession of the property or makes first use of the property, whichever comes first. Prepaid Meal Plan. - The gross receipts derived from a prepaid meal plan are sourced to the location where the food or prepared food is available to be consumed by the person. Admissions. - The gross receipts derived from an admission charge, as defined in G.S. 105-164.4G, are sourced in accordance with G.S. 105-164.4G. Computer Software Renewal. - The gross receipts derived from the renewal of a service contract for prewritten software is generally sourced pursuant to subdivision (a) of this section. However, sourcing the renewal to an address where the purchaser received the underlying prewritten software does not constitute bad faith provided the seller has not received information from the purchaser that indicates a change in the location of the underlying software. History (2001-347, s. 2.9; 2002-16, s. 5; 2003-284, s. 45.3; 2004-170, s. 20; 2006-33, s. 3; 2006-66, s. 24.13(a); 2008-187, s. 42; 2009-445, s. 12; 2010-31, s. 31.6(b); 2010-123, s. 10.2; 2011-330, s. 29; 2012-79, s. 2.8; 2013-414, s. 23(b); 2014-3, ss. 4.1(c), 5.1(b); 2016-5, s. 3.3; 2017-204, s. 2.3; 2018-5, s. 38.5(d); 2019-169, s. 3.3(a).) Editor's Note. - A new G.S. 105-164.4 B, relating to tax on telecommunications, was enacted by Session Laws 2001-430, s. 6, effective January 1, 2002, and recodified as G.S. 105-164.4 C by Session Laws 2001-487, s. 67(a), also effective January 1, 2002. Session Laws 2003-284, s. 45.1, provides: "The Streamlined Sales and Use Tax Agreement is an historic multistate agreement designed to simplify and modernize sales and use tax collection and administration. The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections. To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement. This part [Part XLV of Session Laws 2003-284] makes those necessary changes." Session Laws 2003-284, s. 48.1, provides: "Parts 32 through 47 of this act do not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by those parts before the effective date of its amendment or repeal; nor do they affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal." Session Laws 2003-284, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2003'." Session Laws 2003-284, s. 49.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2003-2005 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2003-2005 fiscal biennium." Session Laws 2003-284, s. 49.5 is a severability clause. Session Laws 2010-31, s. 31.6(g), stated, in part, in its prefatory language that "This act becomes effective January 1, 2011." The prefatory language was amended by Session Laws 2010-123 s. 10.2, to read "This section becomes effective January 1, 2011." Session Laws 2010-31, s. 1.1, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2010'." Session Laws 2010-31, s. 32.6 is a severability clause. Subsection (g), as added by Session Laws 2014-3, s. 5.1(b), was redesignated as subsection (h) at the direction of the Revisor of Statutes. Session Laws 2017-204, s. 2.13, provides: "Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law." Session Laws 2017-204, s. 7.1, is a severability clause. Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'" Session Laws 2018-5, s. 39.7, is a severability clause. Effect of Amendments. - Session Laws 2003-284, s. 45.3, effective July 15, 2003, rewrote the section heading; in subsection (a), added "General" preceding "Principles"; redesignated and rewrote former subsection (b) as subsection (d); and inserted new subsections (b) and (c). Session Laws 2004-170, s. 20, effective August 2, 2004, substituted "address from which tangible personal property was shipped or from which a service was provided" for "billing address of the purchaser" in subdivision (a)(3)c. Session Laws 2006-33, s. 3, effective January 1, 2007, in subdivision (a)(3)b, substituted "wireless calling" for "telephone calling service that authorizes the purchase of mobile telecommunications." Session Laws 2006-66, s. 24.13(a), effective July 1, 2006, and applicable to lease or rental payments made on or after that date, substituted "equipment, and a utility company railway car" for "equipment" at the end of subdivision (b)(1); added subdivision (b)(4) and made a minor stylistic change. Session Laws 2008-187, s. 42, effective August 7, 2008, substituted "subdivision (a)(3)" for "subsection (a)" in subdivision (d)(2). Session Laws 2009-445, s. 12, effective August 7, 2009, in subdivision (d)(2), in the introductory language, substituted "following descriptions is sourced to the location where the property delivered, and direct mail that does not meet one of these descriptions is sourced to the location from which the direct mail was shipped" for "conditions of this subdivision is sourced to the location where the property is delivered. In all other cases, direct mail is sourced in accordance with the principles principle set out in subdivision (a)(3) of this section"; and added subdivision (d)(3). Session Laws 2010-31, s. 31.6(b), as amended by Session Laws 2010-123, s. 10.2, effective January 1, 2011, and applicable to gross receipts derived from the rental of an accommodation that a consumer occupies or has the right to occupy on or after that date, added subsection (e). Session Laws 2011-330, s. 29, effective June 27, 2011, added subsection (f). Session Laws 2012-79, s. 2.8, effective June 26, 2012, rewrote subsection (a). Session Laws 2013-414, s. 23(b), effective August 23, 2013, rewrote subdivision (d)(2). Session Laws 2014-3, s. 4.1(c), effective May 29, 2014, added subsection (g). See Editor's note for applicability. Session Laws 2014-3, s. 5.1(b), effective May 29, 2014, added subsection (g) (redesignated as subsection (h) - see note). See Editor's note for applicability. Session Laws 2016-5, s. 3.3, effective May 11, 2016, substituted "as defined in G.S. 105-164.4 F" for "as defined in G.S. 105-164.4(a)(3) " in subsection (e). Session Laws 2017-204, s. 2.3, added the second sentence in the introductory paragraph of subsection (a). For effective date and applicability, see editor's note. Session Laws 2018-5, s. 38.5(d), effective June 12, 2018, in subsection (a), added "for the seller's purpose and do not alter the application of the tax imposed under G.S. 105-164.6 " at the end of the first sentence; and added subsection (i). Session Laws 2019-169, s. 3.3(a), effective July 26, 2019, substituted "item", or "an item" for "product" or "a product" throughout subsection (a); and, in subsection (f), added "Certain" in the heading and inserted "certain" in the text.