Lawmakers Pass Bill That Let's State Collect From Online Vendors

Sep 12, 2018

Governor Dennis Daugaard signing SB 1, which allows the state to collect online sales tax from online vendors.
Credit Lee Strubinger / SDPB

Starting November first, the state of South Dakota will collect sales taxes from online purchases.

This comes after years of political wrangling and a US Supreme Court decision that allows the state to require online retailers to remit sales tax from purchases.

When South Dakota lawmakers passed a bill several sessions ago that requires online vendors to remit sales tax to the state, the legislation carried an automatic injunction incase the bill was challenged in court.

It was.

Sponsors of the bill say it was designed to challenge a decades old supreme court decision that prevents states from collecting revenue from businesses not located in a state’s boundaries.

But online shopping changed all of that and the country’s high court agrees.

Republican State Senator Deb Peters was the prime sponsor of the law that was challenged up to the Supreme Court. She says the state will collect online sales taxes in November much like neighboring states.

“Right now we’re just trying to make sure we stay in the mix as far as when states are putting things online and allowing it so that when retailers are trying to comply with certain state laws that we’re making sure we’re consistent with our neighbors,” Peters says. “Part of that is that timing.”

Peters says the November date also gives the state a chance to notify retailers of their new requirements.

Under the law, businesses without a physical presence in South Dakota who have either 200 transactions or 100,000 dollars worth of transactions are required to submit tax collections to the state.

Republican State Representative Drew Dennert voted against the bills. He says he opposes the bill because they’re a tax expansion.

“Because it’s not like we’re increasing the rate of taxation, we’re just broadening who is taxed or where we’re taxing,” Dennert says. “It’s more of a tax expansion. I’d prefer to keep it revenue neutral.”

Dennert points to an amendment attached to the laws that ratchets down the state sales tax a tenth of a percent for every 20 million dollars raised by sales tax collections.

Governor Dennis Daugaard says clarifying what’s called the Partridge Amendment is best for future legislatures and the next governor.

Daugaard says this legislation was decades in the making. He says it helps South Dakota maintain a low tax environment.

“Prior to this legislation we were losing, every year, a little bit more of our tax base,” Daugaard says. “Overtime, you either need to expand your base or increase your rate. Today, we ensure that our tax base can be maintained, we stop the erosion that’s occurred over the last 20 years… that accelerating erosion.”

Lawmakers are also passing a bill that sets up a permit, which allows online marketplaces, like eBay and Amazon, to collect tax on behalf of vendors who use their platform. Those marketplaces would then remit the tax to the state.