North Carolina Announces Internet Transactions Resolution Program to Encourage Tax Law Compliance from Online Retailers


The North Carolina Department of Revenue (“NC DOR”) is targeting online out-of-state retailers that have operated affiliate programs in the state to resolve issues of potential sales and use tax liability and assist the State‘s revenue collection.  The NC DOR‘s Internet Transactions Resolution Program (“Program”) is intended to foster cooperative discussions between the NC DOR and online out-of-state retailers.

The Program is based on the affiliate nexus theory the most famous example of which is the state of New York’s “Amazon Law” which targets online retailers who pay commissions based on sales generated from web-traffic directed from other affiliated websites.  The law declares that any such online retailers (i.e. who pay commissions to affiliate websites that are physically located within New York) have a sufficient physical presence to establish a nexus relationship with the state.  This law was nicknamed the “Amazon Law,” because it specifically targeted the online retailer‘s affiliate program. has challenged the law in court but lost at the trial court level, and it is now appealing the ruling.  New York seems to have touched off a trend, with North Carolina already having passed a comparable law and several other states considering similar legislation.  Through the Program, the NC DOR hopes to increase compliance with its new “Amazon Law.”

Under the NC Program, any retailer that failed to register for sales and use tax as a result of operating an affiliate program in North Carolina at any time is eligible to participate in the Program.  Participants may resolve their prior tax liability by registering for sales and use tax and agreeing to collect and remit those taxes for four years, beginning September 1, 2010.

The NC DOR agrees not to assess tax, penalties or interest for periods prior to September 1, 2010 for retailers that successfully complete the Program.  The Program began on April 23, 2010.  Eligible retailers must submit an election to participate in the Program by June 30, 2010.  A resolution agreement must be signed by both the retailer and NC DOR by August 31, 2010.

Additional information regarding the Program can be obtained through the NC DOR‘s website:

If you have any questions or concerns regarding North Carolina‘s Internet Transactions Resolution Program, please contact the attorney assigned to your account.  Alternatively, you may reply to this message via e-mail and someone will promptly respond to your inquiry.

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