FILED SENATE
Apr 2, 2019
GENERAL ASSEMBLY OF NORTH CAROLINA
S.B. 523
SESSION 2019 PRINCIPAL CLERK
S D
SENATE BILL DRS55055-SVxf-6A*
Short Title: Rev. Laws Clarifying & Administrative Changes. (Public)
Sponsors: Senators Tillman, Hise, and Newton (Primary Sponsors).
Referred to:
1 A BILL TO BE ENTITLED
2 AN ACT TO MAKE VARIOUS CLARIFYING AND ADMINISTRATIVE CHANGES TO
3 THE REVENUE LAWS.
4 The General Assembly of North Carolina enacts:
5
6 PART I. BUSINESS TAX CHANGES
7 SECTION 1.1.(a) G.S. 105-154(d) reads as rewritten:
8 "(d) Payment of Tax on Behalf of Nonresident Owner or Partner. – If a business conducted
9 in this State is owned by a nonresident individual or by a partnership having one or more
10 nonresident members, the manager of the business shall report information concerning the
11 earnings of the business in this State, the distributive share of the income of each nonresident
12 owner or partner, and any other information required by the Secretary. The distributive share of
13 the income of each nonresident partner includes any guaranteed payments made to the partner.
14 The manager of the business shall pay with the return the tax on each nonresident owner or
15 partner's share of the income computed at the rate levied on individuals under G.S. 105-153.7.
16 The business may deduct the payment for each nonresident owner or partner from the owner or
17 partner's distributive share of the income of the business in this State. If the nonresident partner
18 is not an individual and the partner has executed an affirmation that the partner will pay the tax
19 with its corporate, partnership, trust, or estate income tax return, the manager of the business is
20 not required to pay the tax on the partner's share. In this case, the manager shall include a copy
21 of the affirmation with the report required by this subsection. Notwithstanding the provisions of
22 G.S. 105-241.7(b), the manager of the business may not request a refund of an overpayment made
23 on behalf of a nonresident owner or partner if the manager of the business has previously filed
24 the return and paid the tax due. The nonresident owner or partner may, on its own income tax
25 return, request a refund of an overpayment made on its behalf by the manager of the business
26 within the provisions of G.S. 105-241.6."
27 SECTION 1.1.(b) This section is effective for taxable years beginning on or after
28 January 1, 2019, and applies to a request for refund filed on or after that date.
29
30 PART II. PERSONAL INCOME TAX CHANGES
31 SECTION 2.1.(a) G.S. 105-153.8(e) reads as rewritten:
32 "(e) Joint Returns. – A husband and wife whose adjusted gross income is determined on a
33 joint federal return must file a single income tax return jointly if each spouse either is a resident
34 of this State or has North Carolina taxable income and may file a single income tax return jointly
35 if one spouse is not a resident and has no North Carolina taxable income. Except as otherwise
36 provided in this Part, a wife and husband filing jointly are treated as one taxpayer for the purpose
*DRS55055-SVxf-6A*
 General Assembly Of North Carolina Session 2019
1 of determining the tax imposed by this Part. A husband and wife filing jointly are jointly and
2 severally liable for the tax imposed by this Part reduced by the sum of all credits allowable
3 including tax payments made by or on behalf of the husband and wife. However, if a spouse
4 qualifies for relief of liability for federal tax attributable to a substantial understatement by the
5 other spouse pursuant to section 6015 of the Code, that spouse is not liable for the corresponding
6 tax imposed by this Part attributable to the same substantial understatement by the other spouse.
7 Part. A wife and husband filing jointly have expressly agreed that if the amount of the payments
8 made by them with respect to the taxes for which they are liable, including withheld and
9 estimated taxes, exceeds the total of the taxes due, refund of the excess may be made payable to
10 both spouses jointly or, if either is deceased, to the survivor alone."
11 SECTION 2.1.(b) This section is effective for taxable years beginning on or after
12 January 1, 2018.
13
14 PART III. SALES AND USE TAX CHANGES
15 SECTION 3.1.(a) G.S. 105-164.3 reads as rewritten:
16 "§ 105-164.3. Definitions.
17 The following definitions apply in this Article:
18 (1) Advertising and promotional direct mail. – Printed material that meets the
19 definition of "direct mail" and the primary purpose of which is to attract public
20 attention to a product, an item, person, business, or organization, or to attempt
21 to sell, popularize, or secure financial support for a product, an item, person,
22 business, or organization. As used in this subdivision, "product" means
23 tangible personal property, digital property, or a service.
24 …
25 (1i) Bundled transaction. – A retail sale of two or more distinct and identifiable
26 products, items, at least one of which is taxable and one of which is exempt,
27 nontaxable, for one nonitemized price. The term does not apply to real
28 property and or services to real property. Products Items are not sold for one
29 nonitemized price if an invoice or another sales document made available to
30 the purchaser separately identifies the price of each product. item. A bundled
31 transaction does not include the retail sale of any of the following:
32 a. A product An item and any packaging item that accompanies the
33 product item and is exempt under G.S. 105-164.13(23).
34 b. A sale of two or more products items whose combined price varies, or
35 is negotiable, depending on the products items the purchaser selects.
36 c. A sale of a product an item accompanied by a transfer of another
37 product item with no additional consideration.
38 d. A product An item and the delivery or installation of the product.item.
39 e. A product An item and any service necessary to complete the sale.
40 …
41 (2c) Capital improvement. – One or more of the following:
42 a. New construction, reconstruction, or remodeling.
43 b. Performance of work that requires the issuance of a permit under the
44 State Building Code, other than repair or replacement of electrical
45 components, gas logs, water heater, and similar individual items
46 tangible personal property that are not part of new construction,
47 reconstruction, or remodeling.
48 …
49 f. Replacement or installation of a septic tank system, siding, roof,
50 plumbing, electrical, commercial refrigeration, irrigation, sprinkler, or
51 other similar system. The term does not include the repair,
Page 2 DRS55055-SVxf-6A*
 General Assembly Of North Carolina Session 2019
1 replacement, or installation of electrical or plumbing components,
2 water heaters, gutters, and similar individual items tangible personal
3 property that are not part of new construction, reconstruction, or
4 remodeling.
5 g. Replacement or installation of a heating or air conditioning unit or a
6 heating, ventilation, or air conditioning system. The term does not
7 include the repair, replacement, or installation of gas logs, water
8 heaters, pool heaters, and similar individual items tangible personal
9 property that are not part of new construction, reconstruction, or
10 remodeling.
11 …
12 (2f) Certain digital property. – An item listed in this subdivision that is delivered
13 or accessed electronically is not considered tangible personal property and
14 would be taxable under this Article if sold in a tangible medium. The term
15 does not include an information service. The items are:
16 a. An audio work.
17 b. An audiovisual work.
18 c. A book, magazine, a newspaper, a newsletter, a report, or another
19 publication.
20 d. A photograph or a greeting card.
21 …
22 (4d) Computer supply. – An item that is considered a "school computer supply"
23 under the Streamlined Agreement.
24 (5) Consumer. – A person who stores, uses, or otherwise consumes in this State
25 tangible personal property, digital property, or a service an item purchased or
26 received from a retailer or supplier either within or without this State.
27 …
28 (6) Delivery charges. – Charges imposed by the retailer for preparation and
29 delivery of personal property or services an item to a location designated by
30 the consumer.
31 …
32 (9) Engaged in business. – Any of the following:
33 a. Maintaining, occupying, or using permanently or temporarily, directly
34 or indirectly, or through a subsidiary or agent, by whatever name
35 called, any office, place of distribution, sales or sample room,
36 warehouse or storage place, or other place of business for selling or
37 delivering tangible personal property, digital property, or a service for
38 storage, use, or consumption in this State, or permanently or
39 temporarily, directly or through a subsidiary, having any
40 representative, agent, sales representative, or solicitor operating in this
41 State in the selling or delivering. State. The fact that any corporate
42 retailer, agent, or subsidiary engaged in business in this State may not
43 be legally domesticated or qualified to do business in this State is
44 immaterial.
45 b. Maintaining in this State, either permanently or temporarily, directly
46 or through a subsidiary, tangible personal property or certain digital
47 property for the purpose of lease or rental.
48 …
49 (12) Gross sales. – The sum total of the sales price of all retail sales of tangible
50 personal property, digital property, and services.items.
51 …
DRS55055-SVxf-6A* Page 3
 General Assembly Of North Carolina Session 2019
1 (16a) Item. – Tangible personal property, certain digital property, or a service,
2 unless the context requires otherwise.
3 …
4 (16e) Landscaping. A service that modifies the living elements of an area of land.
5 Examples include the installation of trees, shrubs, or flowers on land; tree
6 trimming; mowing; and the application of seed, mulch, pine straw, or fertilizer
7 to an area of land. The term does not include services to trees, shrubs, flowers,
8 and or similar items tangible personal property in pots or in buildings.
9 …
10 (17) Lease or rental. – A transfer of possession or control of tangible personal
11 property or certain digital property for a fixed or indeterminate term for
12 consideration. The term does not include any of the following:
13 …
14 (25) Nonresident retail or wholesale merchant. – A person who does not have a
15 place of business in this State, is registered for sales and use tax purposes in a
16 taxing jurisdiction outside the State, and is engaged in the business of
17 acquiring, by purchase, consignment, or otherwise, tangible personal property
18 or certain digital property and selling the property outside the State or in the
19 business of providing a service.
20 …
21 (33j) Remote sale. – A sale of tangible personal property or digital property an item
22 ordered by mail, by telephone, via the Internet, mobile phone application, or
23 by another similar method, to a purchaser who is in this State at the time the
24 order is remitted, from method by a retailer who receives the order in another
25 state and delivers the property item or makes it accessible to a person in this
26 State or causes it the item to be delivered or made accessible to a person in
27 this State. State or performs a service sourced to this State. It is presumed that
28 a resident of this State who remits makes an order was in this State at the time
29 the order was remitted.made.
30 …
31 (33l) Repair, maintenance, and installation services. – The term includes the
32 activities listed in this subdivision and applies to tangible personal property,
33 motor vehicle, vehicles, certain digital property, and real property. The term
34 does not include services a service used to fulfill a real property contract taxed
35 in accordance with G.S. 105-164.4H:G.S. 105-164.4H. The included
36 activities are:
37 …
38 d. To install, apply, connect, adjust, or set into position tangible personal
39 property or certain digital property. The term includes floor refinishing
40 and the installation of carpet, flooring, floor coverings, windows,
41 doors, cabinets, countertops, and other installations where the item
42 being installed may replace a similar existing item. The replacement
43 of more than one of a like-kind item, such as replacing one or more
44 windows, is repair, maintenance, and installation services. The term
45 does not include an installation defined as a capital improvement under
46 subdivision (2c)d. of this section and substantiated as a capital
47 improvement under G.S. 105-164.4H(a1).
48 e. To inspect or monitor property or install, apply, or connect tangible
49 personal property or certain digital property on a motor vehicle or
50 adjust a motor vehicle.
51 …
Page 4 DRS55055-SVxf-6A*
 General Assembly Of North Carolina Session 2019
1 (35) Retailer. – Any of the following persons:
2 a. A person engaged in business of making sales at retail, offering to
3 make sales at retail, or soliciting sales at retail of tangible personal
4 property, digital property for storage, use, or consumption in this State,
5 or services items sourced to this State. When the Secretary finds it
6 necessary for the efficient administration of this Article to regard any
7 sales representatives, solicitors, representatives, consignees, peddlers,
8 or truckers as agents of the dealers, distributors, consignors,
9 supervisors, employers, or persons under whom they operate or from
10 whom they obtain the items sold by them regardless of whether they
11 are making sales on their own behalf or on behalf of these dealers,
12 distributors, consignors, supervisors, employers, or persons, the
13 Secretary may so regard them and may regard the dealers, distributors,
14 consignors, supervisors, employers, or persons as "retailers" for the
15 purpose of this Article.
16 b. A person, other than a real property contractor, engaged in business of
17 delivering, erecting, installing, or applying tangible personal property
18 or certain digital property for use in this State.
19 c. A person engaged in business of making a remote sale, if one of the
20 conditions