Two states — North Carolina and South Dakota — have enacted laws that require the state to purchase goods and services only from companies that collect sales tax on all sales in the state. This is an option that may be available to local governments, as well.
Below is North Carolina’s law, passed in 1999.
GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION LAW 1999-341
HOUSE BILL 1433
AN ACT TO PROVIDE FOR INDIVIDUALS TO PAY THEIR ANNUAL USE TAX WITH THEIR INCOME TAX FORMS, TO PROMOTE ELECTRONIC FILING, AND TO IMPROVE TAX COLLECTION.
The General Assembly of North Carolina enacts:
Section 1. G.S. 105-164.16(d) reads as rewritten:
“(d) Use Tax on Out-of-State Purchases. — [strike out ->]Notwithstanding subsection (b),<- strike out] [added text->Use tax payable by<- added text] an individual who purchases tangible person al property outside the State for a nonbusiness purpose shall file a use tax return is due on an annual basis. [strike out ->The<- strike out] [added text ->For an individual who is not required to file an individual income tax return under Part 2 of Article 4 of this Chapter,<- added text] the annual reporting period ends on the last day of the calendar [strike out ->year. The return is due by the due date, including any approved extensions, for filing the individual’s income tax return.<- strike out] [added text ->year and a use tax return is due by the following April 15. For an individual who is required to file an individual income tax return, the annual reporting period ends on the last day of the individual’s income tax year, and the use tax must be paid on the income tax return as provided in G.S. 105-269.14.”<- added text]
Section 2. Article 9 of Chapter 105 of the General Statutes is amended by adding a new section to read: “Section 105-269.14. Payment of use tax with individual income tax. [added text ->
(a) Requirement. — An individual who owes use tax that is payable on an annual basis pursuant to G.S. 105-164.16(d)and who is required to file an individual income tax return under Part 2 of Article 4 of this Chapter must pay the use tax with the individual income tax return for the taxable year. The Secretary must provide appropriate space and information on the individual income tax form and instructions. The information must include the following:
(1) An explanation of an individual’s obligation to pay use tax on items purchased from mail order, Internet, or other sellers that do not collect State and local sales and use taxes on the items.
(2) A method to help an individual determine the amount of use tax the individual owes. The method must list categories of items, such as personal computers and clothing, that are commonly sold by mail order or Internet and must include a table that gives the average amounts of use tax payable by taxpayers in various income ranges.
(b) Distribution. — The Secretary must distribute one-third of the net use tax proceeds collected under this section to counties and cities in proportion to their total distributions under Articles 39, 40, and 42 of this Chapter and Chapter 1096 of the 1967 Session Laws for the most recent period for which data is available. The provisions of G.S. 105-472, 105-486, and 105-501 do not apply to tax proceeds distributed under this section.”<- added text]
Section 3. To pay for the costs of programming, form revision, and resources for taxpayer assistance to implement Sections 1 and 2 of this act, the Secretary of Revenue may draw up to one hundred fifty thousand dollars ($150,000) for the 1999-2000 fiscal year from net collections that would otherwise be credited to the General Fund under G.S. 105-269.14, enacted by Section 2 of this act.
Section 4. During the 1999-2000 fiscal year, the Secretary of Revenue shall implement a program to allow those taxpayers required under G.S. 105-164.16 to report and pay sales and use taxes ona semimonthly basis to file the semimonthly return electronically. To pay for this program, the Secretary may draw up to five hundred thousand dollars ($500,000) for the 1999-2000 fiscal year from net collections that would otherwise be credited to the General Fund under G.S. 105-269.14, enacted by Section 2 of this act.
Section 5.(a) The Secretary of Revenue shall contract during the 1999-2001 fiscal biennium for the collection of delinquent tax debts owed by nonresidents and foreign entities. To implement this section, the Secretary may draw funds for the 1999-2000 fiscal year from net collections that would otherwise be credited to the General Fund under G.S. 105-269.14, enacted by Section 2 of this act. The Secretary of Revenue shall report annually to the Revenue Laws Study Committee on its collections pursuant to this contract during the biennium.
Section5.(b) The following definitions apply in this section:
(1) Delinquent tax debt. — The amount of tax due as stated in a final notice of assessment issued to the taxpayer by the Secretary of Revenue when the taxpayer no longer has a right to contest the debt.
(2) Foreign entity. — A foreign corporation as defined in G.S. 55-1-40, a foreign limited liability company as defined in G.S. 57C- 1-03, a foreign limited partnership as defined in G.S. 59-102, or a general partnership formed under the laws of a jurisdiction other than this State.
Section 6. The Department of Revenue shall conduct a study to identify and evaluate proposals for more efficient collection of taxes, including using electronic commerce and other technology to increase efficiency. The study shall include an analysis of the most efficient tax collection methods used in other states. The State Controller shall cooperate with the Department of Revenue in this study. The Department shall report the results of its study, including findings, recommendations, and estimated revenue gains of each recommendation, to the Revenue Laws Study Committee by May 1, 2000. To implement this section, the Secretary of Revenue may draw up to fifty thousand dollars ($50,000)for the 1999-2000 fiscal year from net collections that would otherwise be credited to the General Fund under G.S. 105-269.14, enacted by Section 2 of this act.
Section 7. Article 3 of Chapter 143 of the General Statutes is amended by adding a new section to read: [added text ->”Section 143-59.1. Contracts with certain foreign vendors.
The Secretary of Administration and other entities to which this Article applies shall not contract for goods or services with a vendor if the vendor or an affiliate of the vendor meets one or more of the conditions of G.S. 105-164.8(b) but refuses to collect the use tax levied under Article 5 of Chapter 105 of the General Statutes on its sales delivered to North Carolina. The Secretary of Revenue shall provide the Secretary of Administration periodically with a list of vendors to which this section applies. For the purpose of this section, the term `affiliate’ has the meaning provided in G.S. 105-163.010.”<- added text]
Section 8. G.S. 105-259(b) is amended by adding two new subdivisions to read: [added text ->”
(22) To provide the Secretary of Administration pursuant to G.S. 143-59.1 a list of vendors and their affiliates who meet one or more of the conditions of G.S. 105-164.8(b) but refuse to collect the use tax levied under Article 5 of this Chapter on their sales delivered to North Carolina.
(23) To provide public access to a database containing the names and account numbers of taxpayers who are not required to pay sales and use taxes under Article 5 of this Chapter to a retailer because of an exemption or because they are authorized to pay the tax directly to the Department of Revenue.”<- added text]
Section 9. Sections 1 and 2 of this act are effective for taxable years beginning on or after January 1, 1999. The remainder of this act becomes effective July 1, 1999. In the General Assembly read three times and ratified this the 13th day of July, 1999. s/ Dennis A. Wicker President of the Senate s/ James B. Black Speaker of the House of Representatives s/ James B. Hunt, Jr. Governor Approved 8:39 p.m. this 22nd day of July, 1999