Amazon’s Big Step In The Right Direction
A column by Gov. Dennis Daugaard:
South Dakota is a state with a low tax burden. We are one of only seven states without a personal income tax. We also have no corporate income tax, no business inventory tax, no personal property tax and no inheritance tax. People who live here get to keep more of their earnings.
We are a state that instead relies on a sales tax. Unfortunately, sales tax revenues have been below projections every month of the current fiscal year, which began in July. The farm economy is one reason for weakness in the sales tax. Another reason is the continued growth of online sales.
Online spending in the United States has grown more than 12 percent each year for the past seven years. Under current federal law, an online retailer is not required to collect and remit sales tax unless they have a physical presence in South Dakota. If you buy a new iPad at your local retailer, you pay the sales tax. If you buy it online at BestBuy.com or WalMart.com, you pay the sales tax, because those businesses have retail operations in South Dakota. But if you buy your iPad from TigerDirect.com, you don’t pay sales tax – simply because Tiger Direct has no warehouse or other physical location in South Dakota. Thus the burden to pay the tax falls upon the individual purchaser, and in most cases, those sales do not get reported.
We have been actively addressing this issue for years, but most recently in the 2016 Legislative Session, the Legislature passed and I signed Senate Bill 106. This legislation requires remote sellers with no physical location in South Dakota to collect and remit sales tax on online purchases. Our SD legislation deliberately conflicts with federal law, to prompt litigation now working its way through the courts.
This is not a new tax. It is an issue of tax uniformity. If South Dakota retailers must collect sales taxes, their online competitors should as well.
The Department of Revenue has been reaching out to many online retailers to encourage them to remit sales tax. Thanks to the Department’s efforts, 101 online businesses without a physical presence in our state are voluntarily collecting sales tax from their customers and remitting those dollars. In my State of the State Address, I announced that the state has reached an agreement with Amazon to collect and remit state and local sales taxes in South Dakota. Amazon will begin collecting sales taxes on Feb. 1 and remitting those dollars beginning in late March.
Amazon is a leading online merchant, growing every year by double digits. Amazon’s decision to collect sales tax doesn’t solve the sales tax issue for online purchases, but it’s a big step in the right direction – for our state and our local businesses. I hope other online companies will follow Amazon’s lead.