17 NCAC 05g .0905 services delivered electronically
through or on behalf of an individual or business customer
When a service is delivered
electronically "on behalf of" or "through" a customer as
defined in Rule .0901 of this Subchapter, the methodology provided under this
Rule applies.
(1) Rule of Determination. In
the case of the delivery of a service by electronic transmission, where the
service is delivered electronically to end users or other third-party
recipients through or on behalf of the customer, the service is delivered in
North Carolina to the extent that the end users or other third-party recipients
are in North Carolina. For example, in the case of the direct or indirect delivery
of advertising on behalf of a customer to the customer's intended audience by
electronic means, the service is delivered in North Carolina to the extent that
the audience for the advertising is in North Carolina. In the case of the
delivery of a service to a customer that acts as an intermediary in reselling
the service in substantially identical form to third-party recipients, the
service is delivered in North Carolina to the extent that the end users or
other third-party recipients receive the services in North Carolina. The
provisions in this Sub-Item apply whether the taxpayer's customer is an
individual customer or a business customer and whether the end users or other
third-party recipients to which the services are delivered through or on behalf
of the customer are individuals or businesses.
(2) Rule of
Reasonable Approximation. If the taxpayer cannot determine the state or states
where the services are actually delivered to the end users or other third-party
recipients either through or on behalf of the customer, but has sufficient
information regarding the place of delivery that the taxpayer may reasonably
approximate the state or states where the services are delivered, it shall
reasonably do so.
(3) Select Secondary Rules
of Reasonable Approximation.
(a) If
a taxpayer's service is the direct or indirect electronic delivery of
advertising on behalf of its customer to the customer's intended audience, and
if the taxpayer lacks sufficient information regarding the location of the
audience that the taxpayer may determine or reasonably approximate that
location, the taxpayer shall reasonably approximate the audience in a state for
the advertising using the following secondary rules of reasonable
approximation. If a taxpayer is delivering advertising directly or indirectly
to a known list of subscribers, the taxpayer shall reasonably approximate the
audience for advertising in a state using a percentage that reflects the ratio
of the state's subscribers in the specific geographic area where the advertising
is delivered relative to the total subscribers in that area. For a taxpayer
with less information about its audience, the taxpayer shall reasonably
approximate the audience in a state using the percentage that reflects the
ratio of the state's population in the specific geographic area where the
advertising is delivered relative to the total population in that area.
(b) If
a taxpayer's service is the delivery of a service to a customer that then acts
as the taxpayer's intermediary in reselling that service to end users or other
third party recipients, and the taxpayer lacks sufficient information regarding
the location of the end users or other third party recipients that the taxpayer
may determine or reasonably approximate that location, the taxpayer shall
reasonably approximate the extent to which the service is received in a state
by using the percentage that reflects the ratio of the state's population in
the specific geographic area where the taxpayer's intermediary resells the
services, relative to the total population in that area.
(c) When using the secondary reasonable
approximation methods provided in Sub-items (3)(a) or (b), the relevant
specific geographic area of delivery includes only the areas where the service
was substantially and materially delivered or resold. Unless the taxpayer
demonstrates the contrary, it shall be presumed that the area where the service
was substantially and materially delivered or resold does not include areas
outside the United States.
History Note: Authority G.S. 105-130.4; S.L. 2016-94;
Eff. January 1, 2020 (See S.L. 2019-246, s. 3).