Legislation that would force North Carolina residents to pay use taxes on their purchases by mail, over the Internet or by telephone was approved late last week by the State Senate in a party line vote, 33 Democrat and 14 Republicans.
Senate Democrats say the measure will plug a tax law loophole through which the state is loosing an estimated $5 million in use tax revenues. But Republican lawmakers say the bill just adds to the tax burden of state residents.
The measure also authorizes the state’s participation in the Streamlined Sales and Use Tax Project, a national program for uniform sales and use taxes, sponsored by the National Governors Association, National Conference of State Legislatures and the Multistate Tax Commission.
The Senate action comes at a time when there are conflicting use tax related bills pending in Washington.
One bill, the New Economy Tax Fairness or NET FAIR (S-664) sponsored by Sens. Judd Gregg (R-NH) and Herb Kohl (D-WI), would prohibit states from taxing remove sales unless the seller has a physical presence within the state’s borders.
But the Internet Tax Moratorium and E-Commerce Act (S-512) sponsored by Sen. Byron Dorgan (D-ND), would give states participating in the Streamlined Sales and Use Tax Project, to tax remote sales at a uniform rate.
The North Carolina Democratic-controlled House of Representatives is expected to follow the Senate and approve the measure by a comfortable margin.
If it is approved and signed into law by Gov. Michael Easley, also a Democrat, North Carolina would become the10th state to legislatively authorize participation in the national uniform tax project.
The other nine states are: Arkansas, Indiana, Kentucky, Maryland, North Dakota, Oklahoma, South Dakota, Utah and Wyoming.
Florida, Illinois, Louisiana and Tennessee are expected to join them as soon as the governors of those states sign similar legislation into law.
Meantime lawmakers in 13 other states — Alabama, Iowa, Kansas, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, Pennsylvania, Texas, Vermont, and Wisconsin – are considering similar legislation.
Although no legislation has been introduced in 22 of the remaining 23 states, the possibility of participating in the project is being explored by lawmakers and tax officials.
