Amazon Tax Timing Presents Budgeting Issue

Jan 11, 2017

It’s the start of this year’s legislative session, and leaders are already split over how to budget new money coming to South Dakota. Online retailer Amazon is starting to collect sales tax on South Dakota purchases next month. Its timing could pose a planning issue.

Amazon begins charging both state and local sales tax for South Dakota purchases in February. Democrat and State Senator Billie Sutton says lawmakers should include those dollars in the budget that starts July first.

State Representative Spence Hawley (D) and State Senator Billie Sutton (D)
Credit Kealey Bultena / SDPB

"That should play into our 2018 revenue projections, at least to some degree," Sutton says. "I mean, the estimates prior to this were that we were missing out on $30 million to $40 million a year in sales tax that wasn’t being collected and remitted because of online purchases."

Sutton says Amazon’s share of online sales is a decent chunk of that estimate, so it should result in millions more for South Dakota’s coffers. He says the money should flow to the state’s priorities.

Amazon is sending its first sales tax payment to the state at the end of March. The legislative session ends weeks before those dollars arrive.

State leaders say they cannot accurately predict the amount of money sales from Amazon generate. Governor Dennis Daugaard says he’d need to use a year’s worth of sales and Amazon won’t share that information.

Governor Dennis Daugaard
Credit Kealey Bultena / SDPB

Daugaard says lawmakers should make an intentionally low guess this year and more accurately budget the online sales tax dollars in another legislative session.

"We’ll have a full year’s worth of history by the time we adjourn next year, so I think we’re going to have to, again, create a budget that’s very conservative for revenue estimates. And then, if it turns out that revenue comes in better than that, we can adjust our budget for fiscal year ’18 a year from now," Daugaard says.

The governor says he supports budgeting to conservative numbers because it’s difficult to take money away from programs when revenues fall short.