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SD Readies to Collect Online Sales Tax After Supreme Court Ruling

In a ruling favoring states' right to collect sales tax from internet retailers, the U.S. Supreme Court noted that e-commerce has cost states $33 billion annually since 1992. (mohamedhassan/pixabay)
In a ruling favoring states' right to collect sales tax from internet retailers, the U.S. Supreme Court noted that e-commerce has cost states $33 billion annually since 1992. (mohamedhassan/pixabay)
June 25, 2018

PIERRE, S.D. — South Dakota's Department of Revenue is working on compliance rules for internet sellers who will now be required to pay sales taxes even in states where they have no physical presence.

A ruling by the U.S. Supreme Court last week determined states can compel retailers to collect sales taxes for internet-based transactions. Because South Dakota has no income tax, sales tax is more critical, accounting for 63 percent of the state's general budget.

South Dakota Sen. Deb Peters was instrumental in bringing the case to the Supreme Court. She said local brick-and-mortar stores deserve to operate on the same playing field as e-commerce merchants.

"If you're going to be competing with somebody who is already paying for the infrastructure and the schools and the health system within the community, you still have to follow the same rules,” Peters said.

The court ruled 5-4 in South Dakota v. Wayfair, noting that a previous ruling in 1992 had caused states to lose annual tax revenues of up to $33 billion.

Some critics say while giant retailers such as Wayfair will not be hurt by the ruling, small businesses doing sales on the internet could suffer losses because of necessary software investments. John Tamny, director of the Center for Economic Freedom at Freedomworks, argued the more government collects in revenues, the more control it has over the economy and ultimately taxpayers.

He added that most small businesses do not have the time or resources to become tax collectors.

"The idea of a sales tax is to fund local government,” Tamny said. “If you're a small business, suddenly you've got huge complications to deal with, all because you're serving the needs of someone who lives in a different state."

Before they can collect online sales tax, other states across the country will have to implement a law much like South Dakota did in 2016, that requires online sellers with more than $100,000 in sales to state residents, or 200 or more transactions, to remit sales tax.

Roz Brown, Public News Service - SD