State tax authorities are offering a compromise to online retailers that don't charge charge the state sales tax to their North Carolina customers.
The N.C. Department of Revenue said this morning it will forgive all back sales taxes and penalties to businesses that sign an agreement by Aug. 31 to start charging customers the sales tax.
"We are going to be asking quite a number of them to participate in the program," said revenue Secretary Kenneth Lay. "We have positive indications that several will sign up."
Some e-commerce retailers already collect the sales tax voluntarily, Lay said, but the state revenue department wants all e-commerce businesses to play by the rules. As online sales grow, states lose more tax revenue each year from businesses that don't collect sales tax from their customers.
Lay said businesses that don't collect the state sales tax have an unfair advantage over merchants that add the sales tax to the cost of their products.
As online retailers sign up with the state's Internet Transactions Resolution Program, more state residents will pay the 5.75 percent state sales tax to out-of-state retailers who sell products in this state over the Internet.
The agreement will also require online retailers to collect county and local taxes, raising the tax in most counties to 7.75 percent.
According to estimates, North Carolina will lose nearly $162 million in sales tax revenue this year from businesses that don't collect the tax on North Carolina transactions. The loss will grow to nearly $214 million in 2012.
One of those that doesn't collect the money is Amazon.com. This week the online giant sued to block the state's efforts to collect information on online sales. The revenue department is auditing Amazon.com to determine how much it owes the state in uncollected sales tax.
The U.S. Supreme Court ruled nearly two decades ago that out-of-state merchants don't have to pay sales tax unless they have an office in the state. But last year the N.C. General Assembly passed a law saying online retailers do have to pay sales tax if they get online referrals, called click-throughs or affiliate programs, from local web sites.
As part of the Internet Transactions Resolution Program, the state revenue department has identiified and contacted more than 350 online retailers that have such referral programs.