North Carolina Administrative Code › Title 17 - REVENUE › Chapter 05 - CORPORATE FRANCHISE, INCOME, AND INSURANCE TAXES › Subchapter G - MARKET-BASED SOURCING FOR APPORTIONMENT OF INCOME › Section .0900 - SERVICES DELIVERED TO A CUSTOMER OR ON BEHALF OF THE CUSTOMER, OR DELIVERED ELECTRONICALLY THROUGH THE CUSTOMER › Section 05G .0905 - SERVICES DELIVERED ELECTRONICALLY THROUGH OR ON BEHALF OF AN INDIVIDUAL OR BUSINESS CUSTOMER

Current through Register Vol. 39, No. 2, July 15, 2024
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.