North Carolina’s phase-in of single sales factor apportionment became complete for tax years beginning on and after January 1, 2018. However, North Carolina continues to source sales of services based on the location of the income producing activity.3 Following the overwhelming trend towards market-based sourcing throughout the country (particularly those states with single sales factor apportionment), S.B. 622 would adopt market-based sourcing for all receipts, including services, for tax years beginning on and after January 1, 2020.
Under the proposed language, receipts would be sourced to North Carolina if the taxpayer’s “market” for the receipts is in the state. S.B. 622 provides specific rules for determining the market for the following receipt types:
- Sale, rental, lease, or license of real property;
- Rental, lease, or license of tangible personal property;
- Sale of tangible personal property;
- Sale of a service;
- Rental, lease, or license of intangible property; and
- Sale of intangible property.