Web tax plan may be unlikely in '09, delegates say

Gov. Mike Rounds' demand for congressional help with collecting Internet and catalog sales taxes got a lukewarm reaction Wednesday from the state's congressional delegates.

Gov. Mike Rounds' demand for congressional help with collecting Internet and catalog sales taxes got a lukewarm reaction Wednesday from the state's congressional delegates.

Sens. Tim Johnson and John Thune and Rep. Stephanie Herseth Sandlin said they support Rounds' position, but none pledged specific action.

Thune came the closest, saying he and other members of Congress who are interested in the issue "will continue to raise it, and maybe there will be an opportunity somewhere along the way where we can get it addressed and get Congress to act legislatively."

When asked whether ongoing budget shortfalls in states such as South Dakota might spur Congress to action, Thune said it's a possibility.

"I think it probably makes some sense to throw that into this discussion about the stimulus and getting some assistance and relief to some of the states," said Thune, a Republican.


Democratic President-elect Barack Obama is proposing a reported $850 billion stimulus package for the faltering national economy. Johnson, D-S.D., said it's unlikely the sales-tax issue will be addressed in the stimulus package.

"I would hope so," Johnson said. "I have long supported the sales tax provisions, but I would doubt that we see them in a stimulus bill. But who knows?"

The comments from Johnson and Thune came during Wednesday conference calls with reporters, during which numerous other topics were discussed.

Rounds raised the issue of Internet and catalog sales taxes Tuesday during his State of the State address at the Capitol in Pierre. He said congressional inaction is to blame for South Dakota's shortfall in sales-tax revenue.

"If Congress had already passed the Streamlined Sales Tax Act, we wouldn't be having these revenue problems," Rounds said.

The Streamlined Sales Tax Act is another name for the Sales Tax Fairness and Simplification Act, which failed to gain approval during the last session of Congress. The bill, which so far has not been re-introduced in the new session of Congress, would authorize states to require sales taxes from companies that transact "remote" sales.

Remote sales occur when a consumer in a particular state makes a purchase from a seller who lacks a physical presence in that state -- when a South Dakotan, for example, buys something on the Internet from a company in New York that does not have any stores in South Dakota.

States currently are prohibited from requiring sales-tax collections by remote sellers because of a 1992 U.S. Supreme Court ruling. The legislation offered last session in Congress would have changed that, but as Thune said Wednesday, "there hasn't been the critical mass on this issue in the past to take it on."


"There's a real reluctance, I think, by some members of the Congress to take on these issues that further regulate the Internet, whether that deals with user fees or transaction fees or anything like that," Thune said.

South Dakota and some other states already are members of a Streamlined Sales Tax Governing Board designed to make it easier for companies to voluntarily collect and remit sales taxes on Internet and catalog transactions. The aim is to encourage retailer participation by making state tax regulations more uniform, and many retailers already have joined the effort.

Still, Rounds said Tuesday that South Dakota is missing out on $40 million this year, and its cities are missing out on $20 million, because of Congress' inaction.

"So if Congress really wants to help the states, it should create fair taxation and pass the Streamlined Sales Tax Act this year," Rounds said.

Thune and Johnson were among four co-sponsors of the Senate version of the Sales Tax Fairness and Simplification Act.

Herseth Sandlin, D-S.D., was among 10 co-sponsors of the House version of the bill.

A spokeswoman for Herseth Sandlin said Wednesday that the congresswoman is "hopeful for progress on similar legislation in the 111th Congress."

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