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OPINION: Internet sales decision has an unrelated catch

PIERRE -- Mark July 1, 2020, on your calendars as T Day in South Dakota. It's when South Dakota and six other states lose their "grandfathered" status on charging sales tax on Internet access charges. South Dakota state government would lose $12 ...

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PIERRE - Mark July 1, 2020, on your calendars as T Day in South Dakota.

It's when South Dakota and six other states lose their "grandfathered" status on charging sales tax on Internet access charges.

South Dakota state government would lose $12 million to $15 million of sales tax revenue. Municipal and tribal governments that levy a local sales tax would take a hit of $7 million to $10 million.

Those amounts are in a memo delivered in late recently to the Legislature's Joint Committee on Appropriations from Tony Venhuizen, the governor's chief of staff.

The memo said the numbers were estimates based on fiscal 2017 data.

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With the way consumers and businesses are rapidly piling up data charges on their cell phones, the amounts likely would be higher in two years.

You could tell minds were whirring among some of the legislators around the appropriations table: Companies might change monthly bills to reap more benefit.

This wasn't a state law. Congress passed it. Our three members will explain their votes in this space next week.

But the repeal does conflict with a state law passed in 2016.

Legislation from Sen. Deb Peters, R-Hartford, levied state and local sales taxes on goods and services that remote sellers deliver into South Dakota.

The U.S. Supreme Court announced on June 21 South Dakota's law could stand in the Wayfair decision.

The justice ruled 5-4 state and local governments could charge sales tax on products from remote sellers without a physical presence in the state that sell products in South Dakota.

There are guesses about how much those sales might be. Peters' SB 106 required sellers have more than $100,000 in sales during a year or make at least 200 transactions.

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The state Revenue Department on its website currently interprets the law:

"Once a business meets either of the thresholds of SDCL 10-64-2 in the previous calendar year, the business is required to become licensed and remit South Dakota sales tax for the following year.

"When a business meets either the thresholds of SDCL 10-64-2 during the current calendar year, the business is required to become licensed and remit South Dakota sales tax from that point forward.

"However, the Department is legally precluded from enforcing retroactive tax collection on remote sellers per SDCL 10-64-6."

There's also the amendment Sen. Jeff Partridge, R-Rapid City, added to another law passed in 2016. The law increased state sales tax to 4.5 percent from 4 percent for property-tax relief and higher teachers' salaries.

The Partridge amendment requires the additional sales tax be gradually rolled back, in $20 million increments, from revenue produced by taxing remote sales.

At the time, the $20 million in the Partridge amendment was equal to about one-tenth of one percent of the sales-tax rate. Now that amount is already past $22 million. So the Partridge amendment needs work, too.

The U.S. Supreme Court returned the South Dakota case so the state's courts could finish with it. Meanwhile other states are talking about taxing Internet sales as early as Oct. 1.

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All of it means there might not be much wind left in the windfall that supposedly awaits South Dakota on taxing sales made over the Internet.

Related Topics: INTERNET
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