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Daugaard: Amazon to begin collecting taxes in South Dakota

Gov. Dennis Daugaard gives his State of the State address to members of the House of Representatives and Senate on Tuesday afternoon in the House Chambers at the State Capitol in Pierre. (Matt Gade / Republic)1 / 3
State Rep. Lance Carson, left, and State Sen. Joshua Klumb follow along as Gov. Dennis Daugaard gives his State of the State address to members of the House of Representatives and Senate on Tuesday afternoon in the House Chambers at the State Capitol in Pierre. (Matt Gade / Republic)2 / 3
Gov. Dennis Daugaard gives his State of the State address to members of the House of Representatives and Senate on Tuesday afternoon in the House Chambers at the State Capitol in Pierre. (Matt Gade / Republic)3 / 3

PIERRE (AP) — Online retail giant Amazon has agreed to begin collecting state and local sales taxes on purchases in South Dakota, Gov. Dennis Daugaard announced Tuesday in his State of the State address.

That's a win for state government, which is heavily dependent on sales tax collections. It comes as a lackluster fiscal outlook is forcing officials to address a shortfall this year and tamp down spending increases for the next budget cycle.

"It's not going to fix everything, but it's a good start," House Republican leader Lee Qualm said. "Hopefully other companies will jump on the bandwagon."

The news follows recent moves by Amazon in Utah, Iowa and Nebraska as more states push to collect taxes on Internet purchases. The company's website says purchases shipped to over 30 states are subject to sales taxes.

Amazon will begin voluntarily collecting state and local sales taxes Feb. 1 and will remit them starting in late March, Daugaard said.

"Their 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," Daugaard said during his speech to the Republican-held Legislature on the opening day of the 2017 legislative session.

It's difficult to project how much money the agreement will mean for the state budget until there's a year's worth of history, Daugaard said. He said the company has declined to give the state such information.

Lawmakers will work with economists to project how much money the state can anticipate moving forward, said Republican Sen. Deb Peters, a member of the Senate Committee on Appropriations.

"It's going to alleviate some of the consternation we have with the current budget," she said.

Amazon didn't immediately respond to an email requesting comment from The Associated Press.

A 1992 U.S. Supreme Court decision bans states from forcing out-of-state retailers to collect taxes if they don't have a physical presence in the state.

The policy bothers brick-and-mortar retailers, who say it creates unfair competition because they're required to collect the tax. It also frustrates states like South Dakota, which receives much of its revenue from sales taxes.

The agreement means that consumers will have to pay more for their orders if they aren't already submitting use taxes when they purchase something sales-tax free.

South Dakota is missing out on $48 million to $58 million annually in state and municipal tax revenues, according to a court complaint filed last year by the state. The lawsuit against several remote retailers is based on a law passed during the 2016 legislative session that requires out-of-state sellers who exceed revenue and transaction thresholds to comply with state sales tax laws.

South Dakota's goal is to ultimately get the high court to overturn its previous ruling. A federal judge is currently weighing whether to send the case back to state court.

Daugaard turned his attention to a voter-approved government ethics overhaul that he criticized in his December budget address. The governor said he will support efforts to repeal and replace the initiative, which instituted a public campaign finance system, tightened campaign finance and lobbying laws and created an ethics commission. Supporters say that they plan to fight for it at the Capitol.

More broadly, after an election season that brought in millions of dollars from out-of-state groups, Daugaard said that lawmakers need to find a way to stop out-of-state interests from experimenting with South Dakota's laws and constitution.

He plans also to push for changes to the state's criminal justice system over the session and said South Dakota needs to fight against growing methamphetamine use and mounting drug arrests.

The governor put his support behind recommendations from a work group he convened including a new interstate drug trafficking task force, law changes to allow authorities to wiretap cellphones and boosting incentives for offenders to complete treatment.

South Dakota's Democratic legislative leaders saw a lot of their policy priorities missing from the address. It's Democrats' job to remind the Republican legislative majorities of the policies that they're not discussing that are important to South Dakota residents, Senate Minority Leader Billie Sutton said.

Those include issues such as pre-kindergarten education, health care, economic development and broadband access. The legislative session ends March 10, although lawmakers come back to consider any vetoes near the end of that month.

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