North Carolina Enacts Sales Tax Legislation Relating to Online Education

Jun 10th, 2020

The North Carolina legislature recently enacted a bill that affects how tax applies to education services and related purchases.

The bill creates two new exemptions that apply retroactively to purchases made on or after October 1, 2019. First, it exempts sales of digital audio and video that qualify as education expenses under North Carolina law to the operator of a home school. Second, it exempts sales that include digital audio or digital video along with nontaxable services (e.g., education services). When the audio or video and the nontaxable services are provided at the same time, the entire transaction is exempt.

The bill also creates a few other changes relating to education services. First, it amends the definition of "certain digital property" to exclude education services. Certain digital property is taxable in North Carolina so this change prevents education services from being taxed. As part of these changes, North Carolina has adopted definitions for "educational service" and "qualifying educational entity."

Finally, the bill exempts certain digital audio and video purchased between October 1, 2019 and August 1, 2020. For this exemption to apply, the purchase must be a digital audio or video work that includes (1) continuing education instruction approved by an occupational licensing board, or (2) professional development instruction for school board members, administrators, or staff. carolina