The state of North Carolina is not seeing a whole lot of sales tax revenue from online sales of UNC athletic gear. UNC is contributing to this problem, and should take the steps to fix it.
Online stores that have a physical presence in North Carolina must charge sales tax. Online stores that are not located in NC cannot be compelled to collect state sales tax — the burden is on the consumer to report it on their yearly taxes.
Very few people report and pay taxes on online purchases. The law says they have to, but the policy is simply unenforceable. Because of this, the state misses out on collecting sales tax on many online purchases shipped to NC.
UNC is part of the problem. The University contracted with an out-of-state company to run the online store for official athletic gear. Because the company is not physically located in North Carolina, it does not have to collect sales tax.
Technically, UNC and the company are following the letter of the law, but this situation just seems wrong.
The current agreement puts the North Carolina government in an ironic situation in which it cannot collect sales tax on merchandise sales that UNC, a part of state government, controls.
Also, UNC merchandise is highly sought after — there are significant gains to be made by taxing these products. While a tax might drive some sales to third-party vendors, UNC should still do the right thing.
UNC, which receives about a quarter of its budget from the state, should take this opportunity contribute to the general fund. UNC has two options to rectify this situation. It should either negotiate with the out-of-state company to collect sales tax or switch to doing business with a company that has a physical presence in North Carolina.
North Carolina’s self-reported sales tax for online purchases is usually unenforceable, but in this case UNC has the power to help the state collect.