SB 557 — Various Finance Law Changes.

(3) Other sales are in this State if any of the following occur:In the case of sale of tangible personal property, if and to the extent the property is received in this State by the purchaser.

In the case of delivery of goods by common carrier or by other means of transportation, including transportation by the purchaser, the place at which the goods are ultimately received after all transportation has been completed is considered the place at which the goods are received by the purchaser.

Direct delivery into this State by the taxpayer to a person or Page 2 Senate Bill 557*-Second Edition General Assembly Of North Carolina Session 2019 firm designated by a purchaser from within or without the State constitutes delivery to the purchaser in this State.

a.

The receipts are from real or tangible personal property located in this State, and includes receipts from incidental services sold as part of, or in connection with, the sale of tangible personal property in this State.

b.

The receipts are from intangible property and are received from sources within this State.

c.

The receipts are from services and the income-producing activities are in this State.

For the purposes of this subdivision, an "income-producing activity" means an activity directly performed by the taxpayer or its agents for the ultimate purpose of generating the sale of the service.

Receipts from income-producing activities performed within and without this State are attributed to this State in proportion to the income-producing activities performed in this State to total income-producing activities performed everywhere that generate the sale of service.

(4) In the case of sale of a service, if and to the extent the service is delivered to a location in this State.

(5) In the case of intangible property that is rented, leased, or licensed, if and to the extent the property is used in this State.

Intangible property utilized in marketing a good or service to a consumer is "used in this State" if that good or service is purchased by a consumer who is in this State.

(6) In the case of intangible property that is sold, if and to the extent the property is used in this State.A contract right, government license, or similarintangible property that authorized the holder to conduct a business activity in a specific geographic area is "used in this State" if the geographic area includes all or part of this State.

Receipts from a sale of intangible propertythat is contingent on the productivity, use, or disposition of the intangible property shall be treated as receipts from therental,lease,orlicensingof theintangibleproperty as provided under subdivision (5) of this subsection.

All other receipts from a sale of intangible property shall be excluded from the numerator and denominator of the sales factor.

(l1) Wholesale Content Distributors.

– A wholesale content distributor's market for receipts is in this State as provided in G.S.

105-130.4A.

In no event may the amount of income apportioned to this State be less than the amount determined under this subsection.

The amount determined under this subsection is the total domestic gross receipts of the wholesale content distributorfrom advertising and licensingactivitiesmultiplied bytwopercent (2%).

For purposes of this section, the term "wholesale content distributor" has the same meaning as defined in G.S.

105-130.4A.

(l2) Banks.

– A bank's market for receipts is in this State as provided in G.S.

105-130.4B.

For purposes of this section, the term "bank" has the same meaning as defined in G.S.

105-130.4B.

… (s2) Pipeline Company.

– Receipts from the transportation or transmission of a petroleum-based liquids pipeline or natural gas by a company subject to rate regulation by the Federal Energy Regulatory Commission shall be apportioned by multiplying the income by a fraction, the numerator of which is the number of barrel miles traffic units in this State during the tax year and the denominator of which is the total number of barrel miles traffic units everywhere during the tax year.

For purposes of this section, the term "barrel mile" means one barrel of liquid property transported one mile."traffic unit" means one or more of the following:

(1) Barrel mile.

– One barrel of liquid property transported one mile.

Senate Bill 557*-Second Edition Page 3 General Assembly Of North Carolina Session 2019 (2) Cubic foot mile.

– One cubic foot of gaseous property transported one mile.

(s3) Electric Power Company.

– All apportionable income of an electric power company shall be apportioned by a fraction, the numerator of which is the average value of the real and tangible personal property owned or rented and used in this State by the electric power company during the income year and the denominator of which is the average value of all the real and tangible personal property owned or rented and used by the electric power company during the income year.

For purposes of this subsection, the term "electric power company" is a company, including any of its wholly owned noncorporate limited liability companies, primarily engaged in the business of supplying electricity for light, heat, current, or power to persons in this State and that is subject to control of one or more of the following entities:

the North Carolina Utilities Commission or the Federal Energy Regulatory Commission.

For purposes of this subsection, the average value of real and tangible personal property owned or rented by an electric power company is determined as follows:

(1) The average value of property shall be determined by averaging the values at the beginning and end of the income year, but in all cases the Secretary may require the averaging of monthly or other periodic values during the income year if reasonably required to reflect properly the average value of the corporation's property.

(2) An electric power company that ceases its operations in this State before the end of its income year because of its intention to dissolve or to relinquish its certificate of authority, or because of a merger, conversion, or consolidation, or for any other reason whatsoever shall use the real estate and tangible personal property values as of the first day of the income year and the last day of its operations in this State in determining the average value of property, but the Secretary may require averaging of monthly or other periodic values during the income year if reasonably required to reflect properly the average value of the electric power company's property.

(3) Property owned by an electric power company is valued at its original cost.

(4) Property rented by an electric power company is valued at eight times the net annual rental rate.

(5) Net annual rental rate is the annual rental rate paid by an electric power company less any annual rental rate received by the electric power company from sub-rentals except that sub-rentals shall not be deducted when they constitute apportionable income.

(6) Any property under construction and any property the income from which constitutes nonapportionable income shall be excluded from the computation of the average value of an electric power company's real and tangible personal property.

… (t3) State Net Loss Apportionment Election.

– Notwithstanding subdivision (l)(4) of this section, a taxpayer with a State net loss balance as of the end of its 2019 taxable year may elect to apportion receipts from services based on the percentage of its income-producing activities performed in this State.

The election must be made on the 2020 tax year return and must be in the form prescribed by the Secretary and contain any supporting documentation the Secretary may require.

The election is binding and irrevocable until the earlier of the tax year in which (i) the existing State net loss balance is fully utilized or (ii) all of the existing State net loss balance has expired, as determined by applying the limitations set forth in G.S.

105-130.8A(b).

A taxpayer must apportion receipts from services in accordance with subdivision (l)(4) of this section for tax years beginning on and after the tax year that the existing State net loss is fully utilized.

Page 4 Senate Bill 557*-Second Edition General Assembly Of North Carolina Session 2019 For purposes of this subsection, a taxpayer's State net loss balance is the total amount of State net losses computed under G.S.

105-130.8A for taxable years beginning before January 1, 2020, and available to carry forward to taxable years beginning on or after January 1, 2020.

A State net loss balance does not include a State net loss created in a taxable year beginning on or after January 1, 2020.

A State net loss created in a taxable year beginning on or after January 1, 2020, must be determined using the apportionment rules in G.S.

105-130.4(l)." SECTION3.(b) Part1ofArticle4ofChapter105oftheGeneralStatutesis amended by adding a new section to read:

"§ 105-130.4A.

Market-based sourcing for wholesale content distributors.

(a) Definitions.

– The definitions in G.S.

105-130.4 and the following definitions apply to this section:

(1) Customer.

– A person who has a direct contractual relationship with a wholesale content distributor from whom the wholesale content distributor derives gross receipts, including a business customer such as an advertiser or licensee and an individual customer that directly subscribes with the wholesale content distributor for access to film programming.

(2) Gross receipts.

– The same meaning as the term "sales" in G.S.

105-130.4.

(3) Wholesale content distributor.

– A broadcast television network, a cable program network, or any television distribution company owned by, affiliated with, or under common ownership with any such network.

The term does not mean orincludeamultichannel videoprogrammingdistributoror adistributor of subscription-based Internet programming services.

(b) Market for Receipts.

– The receipts factor of a wholesale content distributor is a fraction, the numerator of which is the sum of the wholesale content distributor's gross receipts from transactions and activity in the regular course of its trade or business from sources within the State and the denominator of which is the sum of the wholesale content distributor's gross receipts from transactions and activity in the regular course of its trade or business everywhere.

A wholesale content distributor's receipts from transactions and activities in the regular course of its business, including advertising, licensing, and distribution activities, but excluding receipts from the sale of real property or tangible personal property, are in this State if derived from a business customer whose commercial domicile is in this State.

Receipts derived from an individual customer are in this State if the billing address of the individual customer as listed in the broadcaster's books and records is in this State." SECTION3.(c) Part1 ofArticle4ofChapter105 ofthe General Statutesis amended by adding a new section to read:

"§ 105-130.4B.

Market-based sourcing for banks.

(a) Definitions.

– The definitions in G.S.

105-130.4 apply to this section, and the following definitions apply to this section:

(1) Bank.

– Defined in G.S.

105-130.7B.

(2) Billing address.

– The location indicated in the books and records of the taxpayer on the first day of the taxable year, or on the date in the taxable year when the customer relationship began, as the address where any notice, statement, or billing relating to the customer's account is mailed.

(3) Borrower, cardholder, or payor located in this State.

– A borrower, credit cardholder, or payor whose billing address is in this State.

(4) Card issuer's reimbursement fee.

– The fee a taxpayer receives from a merchant's bank because one of the persons to whom the taxpayer has issued a credit, debit, or similar type of card has charged merchandise or services to the card.

Senate Bill 557*-Second Edition Page 5 General Assembly Of North Carolina Session 2019 (5) Credit card.

– A card, or other means of providing information, that entitles the holder to charge the cost of purchases, or a cash advance, against a line of credit.

(6) Debit card.

– A card, or other means of providing information, that enables the holder to charge the cost of purchases, or a cash withdrawal, against the holder's bank account or a remaining balance on the card.

(7) Loan.

– Anyextension of credit resulting from direct negotiations between the taxpayer and its customer, and/or the purchase, in whole or in part, of such an extension of credit from another.

The term includes participations, syndications, and leases treated as loans for federal income tax purposes.

(8) Loan secured by real property.

– A loan or other obligation of which fifty percent (50%) or more of the aggregate value of the collateral used to secure the loan or other obligation, when valued at fair market value as of the time the original loan or obligation was incurred, was real property.

(9) Merchant discount.

– The fee, or negotiated discount, charged to a merchant by the taxpayer for the privilege of participating in a program whereby a credit, debit, or similar type of card is accepted in payment for merchandise or services sold to the cardholder, net of any cardholder chargeback and unreduced by any interchange transaction or issuer reimbursement fee paid to another for charges or purchases made by its cardholder.

(10) Participation.

– An extension of credit in which an undivided ownership interest is held on a prorated basis in a single loan or pool of loans and related collateral.

In a loan participation, the credit originator initially makes the loan and then subsequently resells all or a portion of it to other lenders.

The participation may or may not be known to the borrower.

(11) Payor.

– The person who is legally responsible for making payment to the taxpayer.

(12) Real property owned.

– Real property (i) on which the taxpayer may claim depreciation for federal income tax purposes or (ii) to which the taxpayer holds legal title and on which no other person may claim depreciation for federal income tax purposes or could claim depreciation if subject to federal income tax.

Real property does not include coin, currency, or property acquired in lieu of or pursuant to a foreclosure.

(13) Syndication.

– An extension of credit in which two or more persons fund and each person is at risk only up to a specified percentage of the total extension of credit or up to a specified dollar amount.

(14) Tangible personal property owned.

– Tangible personal property (i) on which the taxpayer may claim depreciation for federal income tax purposes or (ii) to which the taxpayer holds legal title and on which no other person may claim depreciation for federal income tax purposes could claim deprecation if subject to federal income tax.

Tangible personal property does not include coin, currency, or property acquired in lieu of or pursuant to a foreclosure.

(15) Transportation property.

–Vehicles and vessels capableof moving undertheir own power as well as any equipment or containers attached to such property.

Examples of transportation property include aircraft, trains, water vessels, motor vehicles, rolling stock, barges, and trailers.

(b) General Rule.

– The receipts factor of a bank is a fraction, the numerator of which is the total receipts of the taxpayer in this State during the income year, and the denominator of which is the total receipts of the taxpayer everywhere during the income year.

The method of calculating receipts for purposes of the denominator is the same as the method used in determining receipts for purposes of the numerator.

The receipts factor includes only those Page 6 Senate Bill 557*-Second Edition General Assembly Of North Carolina Session 2019 receipts described herein that are apportionableincomefor thetaxable year.

Notwithstandingany other provision under this Part, the receipts from the following are excluded from both the numerator and the denominator of the receipts factor:

(1) Receipts from a casual sale of property.

(2) Receipts exempt from taxation.

(3) The portion of receipts realized from the sale or maturityof securities or other obligations that represents a return of principal.

(4) Receipts in the nature of dividends subtracted under G.S.

105-130.5(b)(3a) and (3b) and dividends excluded for federal tax purposes.

(5) The portion of receipts from financial swaps and other similar financial derivatives that represent thenotional principalamount thatgeneratesthe cash flow traded in the swap agreement.

(c) Receipts from the Sale, Lease, or Rental of Real Property.

– The numerator of the receipts factor includes receipts from the sale, lease, or rental of real property owned by the taxpayer if the property is located within this State or receipts from the sublease of real property if the property is located within this State.

(d) Receipts from the Sale, Lease, or Rental of Tangible Personal Property.

– The method for calculating receipts from the sale, lease, or rental of tangible personal property is as follows:

(1) Tangible personal property.

– Except as provided in subdivision (2) of this subsection, thenumerator ofthereceipts factorincludes receipts from thesale, lease, or rental of tangible personal property owned by the taxpayer if the property is located within this State when it is first placed in service by the lessee.

(2) Transportation property.

– Receipts from the lease or rental of transportation property owned by the taxpayer are included in the numerator of the receipts factor to the extent that the propertyis used in this State.

The extent an aircraft will be deemed to be used in this State and the amount of receipts that is to be included in the numerator of this State's receipts factor is determined by multiplying all the receipts from the lease or rental of the aircraft bya fraction, the numerator of which is the number of landings of the aircraft in this State and the denominator of which is the total number of landings of the aircraft.

If the extent of the use of any transportation property within this State cannot be determined, then the propertywill be deemed to be used wholly in the state in which the propertyhas its principalbaseof operations.

Amotorvehiclewill be deemed to be used wholly in the state in which it is registered.

(e) Interest, Fees, and Penalties from Loans Secured by Real Property.

– The numerator of the receipts factor includes interest, fees, and penalties from loans secured by real property if the property is located within this State.

If the property is located both within this State and one or more other states, the receipts described in this subsection are included in the numerator of the receipts factor if more than fifty percent (50%) of the fair market value of the real property is located within this State.

If more than fifty percent (50%) of the fair market value of the real property is not located within any one state, then the receipts described in this subsection are included in the numerator of the receipts factor if the borrower is located in this State.

The determination of whether the real property securing a loan is located within this State is made as ofthetimetheoriginal agreement was madeandanyandall subsequent substitutions ofcollateral are disregarded.

(f) Interest, Fees, and Penalties from Loans Not Secured by Real Property.

– The numerator of the receipts factor includes interest, fees, and penalties from loans not secured by real property if the borrower is located in this State.

(g) Net Gains from the Sale of Loans.

– The numerator of the receipts factor includes net gains from the sale of loans.

Net gains from the sale of loans include income recorded under the Senate Bill 557*-Second Edition Page 7 General Assembly Of North Carolina Session 2019 coupon stripping rules of section 1286 of the Code.

The amount of net gains from the sale of loans that is included in the numerator is determined as follows:

(1) Secured by real property.

– The amount of net gains, but not less than zero, from the sale of loans secured by real property is determined by multiplying the net gains by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to subsection (e) of this section, and the denominator of which is the total amount of interest, fees, and penalties from loans secured by real property.

(2) Not secured byreal property.

– The amount ofnet gains, but not lessthanzero, from the sale of loans not secured by real property is determined by multiplying the net gains by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to subsection (f) of this section, and the denominator of which is the total amount of interest, fees, and penalties from loans not secured by real property.

(h) Receipts from Interest, Fees, and Penalties from Cardholders.

– The numerator of the receipts factor includes interest, fees, and penalties charged to credit, debit, or similar cardholders, including annual fees and overdraft fees, if the cardholder is located in this State.

(i) Receipts from ATM Fees.

– The numerator of the receipts factor includes receipts from fees from the use of an ATM owned or rented by the taxpayer, if the ATM is located in this State.

The receipts factor includes all ATM fees that are not forwarded directly to another bank.

Receipts from ATM fees that are not sourced under this subsection are sourced pursuant to subsection (l) of this section.

(j) Net Gains from the Sale of Credit Card Receivables.

– The numerator of the receipts factorincludesnet gains, but not lessthanzero, from thesaleofcredit card receivables multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to subsection (h) of this section, and the denominator of which is the taxpayer's total amount of interest, fees, and penalties charged to cardholders.

(k) Miscellaneous Receipts.

– The numerator of the receipts factor includes all of the following:

(1) Cardissuer'sreimbursementfees.–Receiptsfrom cardissuer'sreimbursement fees if the payor is located in this State.

(2) Receipts from merchant's discount.

– Receipts from a merchant discount if the payor is located in this State.

(3) Loan servicing fees.

– Receipts from loan servicing fees if the payor is located in this State.

(4) Receipts from services.

– Receipts from services not otherwise apportioned under this section if the payor is located in this State.

(5) Receipts from investment assets and activity and trading assets and activity.

– Receipts from one or more of the following:

a.

Interest and dividends from investment assets and activities and trading assets and activities if the payor is located in this State.

b.

Net gains and other income, but not less than zero, from investment assets and activities and trading assets and activities multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to sub-subdivision a.

of this subdivision, and the denominator of which is the taxpayer's total amount of interest and dividends from investment assets and activities and trading assets and activities.

(l) All Other Receipts.

– All other receipts not specifically enumerated in this section are included in the numerator of the receipts factor if the payor is located in this State." SECTION 3.(d) G.S.

105-122(c1) reads as rewritten:

Page 8 Senate Bill 557*-Second Edition General Assembly Of North Carolina Session 2019 "(c1) Apportionment.

– A corporation that is doing business in this State and in one or more other states must apportion its net worth to this State.

A corporation must use the apportionment method set out in subdivision (1) of this subsection unless the Department has authorized it to use a different method under subdivision (2) of this subsection.

A taxpayer that has made an election under G.S.

105-130.4(t3) must use the apportionment method set out in subdivision (1) of this subsection as if the election had not been made, unless the Department has authorized a different methodundersubdivision(2)ofthissubsection.Theportionofacorporation's networth determined by applying the appropriate apportionment method is considered the amount of net worth the corporation uses in its business in this State:

(1) Statutory.

– A corporation that is subject to income tax under Article 4 of this Chapter must apportion its capital stock, surplus, and undivided profits by using the fraction it applies in apportioning its income under that Article.

A corporation that is not subject to income tax under Article 4 of this Chapter must apportion its capital stock, surplus, and undivided profits by using the fraction it would be required to apply in apportioning its income if it were subject to that Article.

The apportionment fraction for a wholesale content distributor, as that term is defined in G.S.

105-130.4A, shall not be less than two percent (2%).

The apportionment method set out in this subdivision is considered the statutory method of apportionment and is presumed to be the best method of determining the amount of a corporation's capital stock, surplus, and undivided profits attributable to the corporation's business in this State.

…." SECTION 3.(e) The Utilities Commission shall adjust the rates for public utilities, excluding water public utilities with less than two hundred thousand dollars ($200,000) in annual operating revenues, for the tax changes in subsection (a) of this section.

Each utility shall calculate the cumulative net effect of the tax changes and file the calculations with proposed rate changes to reflect the net prospective tax changes in utility customer rates within 60 days of the enactment of this act.

Any adjustments required to existing tax assets or liabilities reflected in the utility's books and records required by the tax changes shall be deferred and reflected in customer rates in either the utility's next rate case or earlier if deemed appropriate by the Commission.

SECTION 3.(f) Under Section 38.4 of S.L.

2016-94, the Department of Revenue adopted and submitted to the Rules Review Commission rules regarding the implementation and administration of market-based sourcing principles based on legislation proposed in that section.

The Department adopted the rules on January 4, 2017, and submitted the rules to the Rules Review Commission on January 18, 2017.

The Rules Review Commission approved and delivered the rules to the Codifier of Rules on February 16, 2017.

Pursuant to Section 38.4(b) of S.L.

2016-94, the Codifier of Rules did not enter the rules into the Administrative Code.

The Codifier of Rules is hereby directed by the General Assembly to enter the rules into the Administrative Code on the effective date of this act, and the rules apply to taxable years beginning on or after January 1, 2020.

The Department of Revenue shall adopt and submit to the Rules Review Commission rules regarding the implementation and administration of market-based sourcing principles, to the extent modifications are needed based on the statutory changes enacted by this section.

In adopting rules pursuant to this subsection, the following provisions apply:

(1) The exemption provided in G.S.

150B-1(d)(4) applies.

(2) The provisions of G.S.

150B-21.3(b1) and (b2) do not apply.

(3) The provisions of G.S.

150B-21.4 do not apply.

Senate Bill 557*-Second Edition Page 9 General Assembly Of North Carolina Session 2019 SECTION 3.(g) Subsections (a) through (d) of this section are effective for taxable years beginning on or after January 1, 2020.

The remainder of this section is effective when it becomes law.

5 MARKETPLACE FACILITATORS TO COLLECT SALES TAX SECTION 4.(a) G.S.

105-164.3 reads as rewritten:

"§ 105-164.3.

The following definitions applyand inthe thisdefinitions Article:in G.S.

…105-164.3 (20a)apply Marketplace.to this Article:

–… A(3) physicalLong-term orlease electronic place, forum, platform, application, or otherrental. method by which a marketplace seller sells or offers to sell items, the delivery of or first use of which is sourced to this State.

(20b)– Marketplace-facilitatedA sale.lease or rental made under a written agreement to lease or rent property a single motor vehicle to the same person for a period of at least 365 continuous days.

–… The(3c) saleLimited ofpossession ancommitment. item bya marketplace facilitator on behalf of a marketplace seller that occurs through a marketplace.

(20c)– MarketplaceLong-term facilitator.lease or rental, short-term lease or rental, and vehicle subscriptions.

–… A(6) personRetailer. that, directly or indirectly and whether through one or more affiliates, does both of the following:

a.– A retailer as defined in G.S.

Lists105-164.3 orwho otherwiseis makesengaged availablein forthe salebusiness aof marketplaceselling, seller'sleasing, itemsor throughrenting arenting, marketplace owned or operatedoffering byvehicle thesubscriptions marketplacefor facilitator.motor vehicles.

b.(7) Short-term lease or rental.

Does– oneA lease or morerental of thea following:motor vehicle or motor vehicles, including a vehicle sharing service, that is not a long-term lease or rental.rental or a vehicle subscription.

1.(8) Vehicle sharing service.

Collects– theA salesservice pricefor orwhich purchasea priceperson ofpays a marketplacemembership seller'sfee itemsfor the right to use a motor vehicle or otherwisemotor processesvehicles payment.upon payment of an additional time-based or mileage-based fee.

2.(9) Vehicle subscription.

Makes– paymentA processingserviceswritten availableagreement that grants a person the right to purchasersuse forand exchange motor vehicles owned, directly or indirectly, by the saleperson offering the agreement upon payment of a marketplacesubscription seller'sfee, items.but it does not include a vehicle sharing service.

(20d)The Marketplacesubscription seller.fee must provide a person exclusive use of an agreed upon number of motor vehicles at any given time during the full term of the subscription." SECTION 2.

– A person that sells or offers to sell items through a marketplace regardless of any of the following:

a.

Whether the person has a physical presence in this State.

b.

Whether the person is registered as a retailer in this State.

c.

Whether the person would have been required to collect and remit sales and use tax had the sales not been made through a marketplace.

d.

Whether the person would not have been required to collect and remit sales and use tax had the sales not been made through a marketplace.

…." SECTION 4.(b) G.S.

105-164.8(b), as amended by S.L.

2019-6, reads as rewritten:

"(b) Remote Sales.

– A retailer who makes a remote sale is engaged in business in this State and is subject to the tax levied under this Article if at least one of the following conditions is met:

… (3) The retailer solicits or transacts business in this State by employees, independent contractors, agents, or other representatives, whether the remote sales thus subject to taxation by this State result from or are related in any other way to the solicitation or transaction of business.

A retailer is presumed to be soliciting or transacting business by an independent contractor, agent, or other representative if the retailer enters into an agreement with a resident person of this State under which the resident, person, for a commission or other consideration, directly or indirectly refers potential customers, whether byalink on an Internet Websiteorotherwise,to theretailer.

This presumption applies only if the cumulative gross receipts from sales by the retailer to purchasers in this State who are referred to the retailer by all residents persons withthistypeofagreementwiththeretailerisinexcessoftenthousanddollars ($10,000) during the preceding four quarterly periods.

This presumption may Page 10 Senate Bill 557*-Second Edition General Assembly Of North Carolina Session 2019 be rebutted by proof that the resident person with whom the retailer has an agreement did not engage in anysolicitation in the State on behalf of the seller that would satisfy the nexus requirement of the United States Constitution during the four quarterly periods in question.

… (9) The retailer, with respect to retailer makes remote sales into North Carolina sourced to this State, including sales as a marketplace seller, for the previous or the current calendar year, had one or more year that meet either of the following:

a.

Gross sales in excess of one hundred thousand dollars ($100,000).

b.

Two hundred or more separate transactions.

(10) The retailer is a marketplace facilitator that makes sales, including all marketplace-facilitated sales for all marketplace sellers, sourced to this State for the previous or the current calendar year that meet either of the following:

a.

Gross sales in excess of one hundred thousand dollars ($100,000).

b.

Two hundred or more separate transactions." SECTION4.(c) Part2 ofArticle5ofChapter105 oftheGeneral Statutesis amended by adding a new section to read:

"§ 105-164.4J.

Marketplace-facilitated sales.

(a) Scope.

– This section applies to a marketplace facilitator that makes sales, including all marketplace-facilitated sales for all marketplace sellers, sourced to this State for the previous or the current calendar year that meet either of the following:

(1) Gross sales in excess of one hundred thousand dollars ($100,000).

(2) Two hundred or more separate transactions.

(b) Payment of Tax.

– A marketplace facilitator that meets the threshold in subsection (a) of this section is considered the retailer of each marketplace-facilitated sale it makes and is liable for collecting and remitting the sales and use tax on all such sales.

A marketplace facilitator is required to comply with the same requirements and procedures as all other retailers registered or whoarerequiredtoberegisteredtocollect andremitsalesandusetax inthisState.Amarketplace facilitator is required to collect and remit sales tax as required by this section regardless of whether a marketplace seller for whom it makes a marketplace-facilitated sale meets any of the following conditions:

(1) Has a physical presence in this State.

(2) Is required to be registered to collect and remit sales and use tax in this State.

(3) Would have been required to collect and remit sales and use tax in this State had the sale not been made through a marketplace.

(4) Would not have been required to collect and remit sales and use tax in this State had the sale not been made through a marketplace.

(c) Report.

– A marketplace facilitator must provide or make available to each marketplacesellertheinformation listedin this subsection with respect to marketplace-facilitated sales that are made on behalf of the marketplace seller and that are sourced to this State.

The information may be provided in any format and shall be provided or made available no later than 10 days after the end of each calendar month.

The required information to be provided or made available to each marketplace seller is as follows:

(1) Gross sales.

(2) The number of separate transactions.

(d) LiabilityRelief.

– TheDepartment shall not assessamarketplacefacilitatorforfailure to collect the correct amount of tax due if the marketplace facilitator can demonstrate to the Secretary's satisfaction that all of the circumstances listed in this subsection apply.

This subsection does not applywith regard to a marketplace-facilitated sale for which the marketplace facilitator is the marketplace seller or if the marketplace facilitator and the marketplace seller are Senate Bill 557*-Second Edition Page 11 General Assembly Of North Carolina Session 2019 affiliates.

If a marketplace facilitator is not assessed for tax due under this section, the marketplace seller is liable for the tax due under this section provided the marketplace seller is engaged in business in this State.

The circumstances that a marketplace facilitator must demonstrate are as follows:

(1) The failure to collect the correct amount of tax was due to incorrect information given to the marketplace facilitator by the marketplace seller.

(2) The marketplace facilitator did not receive specific written advice from the Secretary for the transaction at issue.

(e) Refund of Tax.

– If a purchaser receives a refund on any portion of the sales price from a marketplace facilitator who collected and remitted the tax on the retail sale, the provisions of G.S.

105-164.11A(a) apply.

(f) Class Actions.

– No class action may be brought against a marketplace facilitator in any court of this State on behalf of customers arising from or in any way related to an overpayment of sales or use tax collected on facilitated sales by a marketplace facilitator, regardless of whether that claim is characterized as a tax refund claim.

Nothing in this subsection affects a customer's right to seek a refund as provided under G.S.

105-164.11.

(g) Agreements.

– Nothing in this section shall be construed to interfere with the ability of a marketplace facilitator and a marketplace seller to enter into an agreement with each other regarding the fulfillment of the requirements of this Article, except that an agreement may not requireamarketplacesellerto collect andremitsalesandusetaxonmarketplace-facilitatedsales.

(h) Use Tax Obligation.

– Nothing in this section affects the obligation of any purchaser to remit use tax for any taxable transaction for which a marketplace facilitator does not collect and remit sales or use tax.

(i) Limitation.

– This section does not apply to an accommodation facilitator, an admission facilitator, or a service contract facilitator whose collection and remittance requirements are set out in G.S.

105-164.4F, 105-164.4G, and 105-164.4I, respectively." SECTION 4.(d) G.S.

105-164.3 reads as rewritten:

"§ 105-164.3.

Definitions.

The following definitions apply in this Article:

(1) Accommodation.

– A hotel room, a motel room, a residence, a cottage, or a similar lodging facility for occupancy by an individual.

(1a) Accommodation facilitator.

– A person that contracts, either directly or indirectly, with a provider of an accommodation to perform, either directly or indirectly, one or more of the activities listed in this subdivision.

The term includes a real estate broker as defined in G.S.

93A-2.

The activities are:

a.

Market the accommodation and accept payment or collect credit card or other payment information for the rental of the accommodation.

b.

List the accommodation for rental on a forum, platform, or other application for a fee or other consideration.

…." SECTION 4.(e) G.S.

105-164.4F reads as rewritten:

"§ 105-164.4F.

Accommodation rentals.

(a) Definition.

– The following definitions apply in this section:

(1) Accommodation.

– A hotel room, a motel room, a residence, a cottage, or a similar lodging facility for occupancy by an individual.

(2) Facilitator.

– A person who is not a rental agent and who contracts with a provider of an accommodation to market the accommodation and to accept payment from the consumer for the accommodation.

(3) Rental agent.

– The term includes a real estate broker, as defined in G.S.

93A-2.

Page 12 Senate Bill 557*-Second Edition General Assembly Of North Carolina Session 2019 (b) Tax.

– The gross receipts derived from the rental of an accommodation are taxed at the general rate set in G.S.

105-164.4.

Gross receipts derived from the rental of an accommodation include the sales price of the rental of the accommodation.

The sales price of the rental of an accommodation is determined as if the rental were a rental of tangible personal property.

The sales price of the rental of an accommodation marketed made by a an accommodation facilitator includes any charges designated as facilitation fees and any other charges or fees, by whatever name called, charged by the accommodation facilitator to the purchaser of the accommodation that are necessary to complete the rental.

The tax is due and payable by the retailer in accordance with G.S.

105-164.16.

(b1) Retailer.

– Except as otherwise provided in subsection (c) of this section, the retailer of the rental of an accommodation is one or more of the persons listed below that collects the payment, oraportion ofthepayment, fortherental oftheaccommodation.

Intheevent theperson who collects the payment cannot be determined or is a third party that is not listed in this subsection, and subsection (c) of this section does not apply, the provider of the accommodation shall be considered the retailer of the transaction.

The retailer is liable for reporting and remitting the tax due on the portion of the gross receipts derived from the rental of the accommodation that the retailer collects.

The retailer may be one or more of the following:

(1) The provider of the accommodation.

(2) An accommodation facilitator.

(c) Certain Accommodation Facilitator Transactions.

– A facilitator must report to the retailer with whom it has a contract the sales price a consumer pays to the facilitator for an accommodation rental marketed by the facilitator.

A retailer must notify a facilitator when an accommodation rental marketed by the facilitator is completed, and the This subsection applies only to an accommodation facilitator that is operated by or on behalf of a hotel or a hotel corporation, that facilitates the rental of hotel accommodations solely for the hotel or the hotel corporation's owned or managed hotels and franchisees, and that collects payment, or a portion of the payment, for the rental of an accommodation.

An accommodation facilitator subject to this subsection is not considered the retailer of the rental of the accommodation.

The accommodation facilitator must send the retailer the portion of the sales price the facilitator owes the retailer and thetax dueon thesales priceprice, ortheportion of thesalesprice, theaccommodation facilitator collected no later than 10 days after the end of each calendar month.

A An accommodation facilitator that does not send the retailer the tax due on the sales price price, or the portion of the sales price the accommodation facilitator collected, is liable for the amount of tax the accommodation facilitator fails to send.

A An accommodation facilitator is not liable for tax sent to a retailer but not remitted by the retailer to the Secretary.

Tax payments received by a retailer from a an accommodation facilitator are held in trust by the retailer for remittance to the Secretary.

A retailer that receives a tax payment from a an accommodation facilitator must remit the amount received to the Secretary.

A retailer is not liable for tax due but not received from a an accommodation facilitator.

The requirements imposed by this section on a retailer and a facilitator are considered terms of the contract between the retailer and the facilitator.

(c1) Accommodation Facilitator Report.

– An accommodation facilitator must file with the Secretary an annual report by March 31 of each year for the prior calendar year for accommodation rentals it makes.

The annual report must be provided in electronic format and include the property owner's name, the property owner's mailing address, the physical location of the accommodation, and gross receipts information for the rentals.

The report may only be used by the Secretary, and any person receiving the report, pursuant to G.S.

105-259, for tax compliance purposes.

(d) Rental Agent.

– A person who, by written contract, agrees to be the rental agent for the provider of an accommodation is considered a retailer under this Article and is liable for the tax imposed by this section.

The liability of a rental agent for the tax imposed by this section relieves the provider of the accommodation from liability.

Senate Bill 557*-Second Edition Page 13 General Assembly Of North Carolina Session 2019 (e) Exemptions.

– The tax imposed by this section does not apply to the following:

(1) Aprivateresidence,cottage,orsimilaraccommodationthatisrentedforfewer than 15 days in a calendar year other than a private residence, cottage, or similar accommodation listed with a real estate broker or agent.unless the rental of the accommodation is made by an accommodation facilitator.

(2) An accommodation supplied to the same person for a period of 90 or more continuous days.

(3) An accommodation arranged or provided to a person by a school, camp, or similar entity where a tuition or fee is charged to the person for enrollment in the school, camp, or similar entity." SECTION 4.(f) G.S.

160A-215(c) reads as rewritten:

"(c) Collection.

– A retailer who is required to remit to the Department of Revenue the State sales tax imposed by G.S.

105-164.4(a)(3) on accommodations is required to remit a room occupancytax to the taxing city on and after the effective date of the levy of the room occupancy tax.

The room occupancy tax applies to the same gross receipts as the State sales tax on accommodations and is calculated in the same manner as that tax.

A rental agent or a facilitator, as defined in G.S.

105-164.4F, An accommodation facilitator, as defined in G.S.

105-164.3, has the same responsibility and liability under the room occupancy tax as the rental agent or accommodation facilitator has under the State sales tax on accommodations.

If a taxable accommodation is furnished as part of a package, the bundled transaction provisions in G.S.

105-164.4D apply in determining the sales price of the taxable accommodation.

If those provisions do not address the type of package offered, the person offering the package may determine an allocated price for each item in the package based on a reasonable allocation of revenue that is supported by the person's business records kept in the ordinary course of business and calculate tax on the allocated price of the taxable accommodation.

A retailer must separately state the room occupancy tax.

Room occupancy taxes paid to a retailer are held in trust for and on account of the taxing city.

The taxing city shall design and furnish to all appropriate businesses and persons in the city the necessary forms for filing returns and instructions to ensure the full collection of the tax.

An operator of a business who collects a room occupancy tax may deduct from the amount remitted to the taxing city a discount equal to the discount the State allows the retailer for State sales and use tax." SECTION 4.(g) G.S.

153A-155(c) reads as rewritten:

"(c) Collection.

– A retailer who is required to remit to the Department of Revenue the State sales tax imposed by G.S.

105-164.4(a)(3) on accommodations is required to remit a room occupancy tax to the taxing county on and after the effective date of the levy of the room occupancy tax.

The room occupancy tax applies to the same gross receipts as the State sales tax on accommodations and is calculated in the same manner as that tax.

A rental agent or a facilitator, as defined in G.S.

105-164.4F, An accommodation facilitator, as defined in G.S.

105-164.3, has the same responsibility and liability under the room occupancy tax as the rental agent or accommodation facilitator has under the State sales tax on accommodations.

If a taxable accommodation is furnished as part of a package, the bundled transaction provisions in G.S.

105-164.4D apply in determining the sales price of the taxable accommodation.

If those provisions do not address the type of package offered, the person offering the package may determine an allocated price for each item in the package based on a reasonable allocation of revenue that is supported by the person's business records kept in the ordinary course of business and calculate tax on the allocated price of the taxable accommodation.

A retailer must separately state the room occupancy tax.

Room occupancy taxes paid to a retailer are held in trust for and on account of the taxing county.

Page 14 Senate Bill 557*-Second Edition General Assembly Of North Carolina Session 2019 The taxing county shall design and furnish to all appropriate businesses and persons in the county the necessary forms for filing returns and instructions to ensure the full collection of the tax.

A retailer who collects a room occupancy tax may deduct from the amount remitted to the taxing county a discount equal to the discount the State allows the retailer for State sales and use tax." SECTION 4.(h) G.S.

105-164.3 reads as rewritten:

"§ 105-164.3.

Definitions.

The following definitions apply in this Article:

… (1b) Admission charge.

– Gross receipts derived for the right to attend an entertainment activity.

The term includes a charge for a single ticket, a multi-occasion ticket, a seasonal pass, and an annual pass;

a membership fee that provides for admission;

a cover charge;

a surcharge;

a convenience fee, a processing fee, a facility charge, a facilitation fee, or similar charge;

or any other charges included in gross receipts derived from admission.

(1c) Admission facilitator.

– A person who accepts payment of an admission charge to an entertainment activity and who is not the operator of the venue where the entertainment activity occurs.

… (1f) Amenity.

– A feature that increases the value or attractiveness of an entertainment activity that allows a person access to items that are not subject to tax under this Article and that are not available with the purchase of admission to the same event without the feature.

The term includes parking privileges, special entrances, access to areas other than general admission, mascot visits, and merchandise discounts.

The term does not include any charge for food, prepared food, and alcoholic beverages subject to tax under this Article.

… (9a) Entertainment activity.

– An activity listed in this subdivision:

a.

A live performance or other live event of any kind, the purpose of which is for entertainment.

b.

A movie, motion picture, or film.

c.

A museum, a cultural site, a garden, an exhibit, a show, or a similar attraction.

d.

A guided tour at anyof the activities listed in sub-subdivision c.

of this subdivision.

…." SECTION 4.(i) G.S.

105-164.4G reads as rewritten:

"§ 105-164.4G.

Entertainment activity.

(a) Definition.

– The following definitions apply in this section:

(1) Admission charge.

– Gross receipts derived for the right to attend an entertainment activity.

The term includes a charge for a single ticket, a multi-occasion ticket, a seasonal pass, and an annual pass;

a membership fee that provides for admission;

a cover charge;

a surcharge;

a convenience fee, a processing fee, a facility charge, a facilitation fee, or similar charge;

or any other charges included in gross receipts derived from admission.

(2) Amenity.

– A feature that increases the value or attractiveness of an entertainment activity that allows a person access to items that are not subject to tax under this Article and that are not available with the purchase of admission to the same event without the feature.

The term includes parking privileges, special entrances, access to areas other than general admission, Senate Bill 557*-Second Edition Page 15 General Assembly Of North Carolina Session 2019 mascot visits, and merchandise discounts.

The term does not include any charge for food, prepared food, and alcoholic beverages subject to tax under this Article.

(3) Entertainment activity.

– An activity listed in this subdivision:

a.

A live performance or other live event of any kind, the purpose of which is for entertainment.

b.

A movie, motion picture, or film.

c.

A museum, a cultural site, a garden, an exhibit, a show, or a similar attraction.

d.

A guided tour at anyof the activities listed in sub-subdivision c.

of this subdivision.

(4) Facilitator.

– A person who accepts payment of an admission charge to an entertainment activity and who is not the operator of the venue where the entertainment activity occurs.

(b) Tax.

– The gross receipts derived from an admission charge to an entertainment activity are taxed at the general rate set in G.S.

105-164.4.

The tax is due and payable by the retailer in accordance with G.S.