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Legislature Spoiling for Fight over Collecting Sales Tax from Remote Sellers

The South Dakota Legislature is struggling to pass an extra half-penny sales tax to fund teacher pay, but they’re having no trouble moving a bill to challenge the Supreme Court for the right to extract sales tax from out-of-state merchants taking advantage of e-commerce to dodge our taxes.

House State Affairs this morning unanimously passed Senate Bill 106, the Main Street Fairness Act, as the South Dakota Retailers and other supporters call it. SB 106 would aggressively seek from Amazon.com and other online sellers the same sales tax that Red Rooster and Zandbroz have to collect when they sell items to South Dakota customers.

Rep. Roger Hunt (R-25/Brandon), the prime House sponsor, told the committee that SB 106 does not impose a new tax (heavens no—we’ve got Americans for Prosperity and the Koch Brothers to keep happy). Rep. Hunt also noted the eleven findings written into SB 106, which make clear that the Legislature is spoiling for another lawsuit (Rep. Hunt likes that sort of thing.) SB 106 seeks to get the Supreme Court to revisit and reverse Quill Corp. v. North Dakota (1992), in which the Supreme Court said states can’t impose sales and use tax on retailers who don’t have physical storefronts in their states.

Perhaps worth noting: Justice Antonin Scalia concurred with the majority in Quill. Arguably, appointing and confirming a new Supreme Court Justice to replace Scalia this year could improve the chances of South Dakota’s prevailing in the desired eventual lawsuit over SB 106. Paging Senator Thune….

53 Comments

  1. Rorschach 2016-02-29

    Yet another example of congressional inaction on an important issue. Congress need only pass a law allowing states to collect sales taxes on internet sales, yet years go by and still no action. If congress would pass this law South Dakota would raise enough new sales tax money that the governor’s sales tax increase for schools would be unnecessary. It is about main street fairness, but the GOPs running congress couldn’t care less about putting their local businesses on equal footing to the online retailers.

  2. Rorschach 2016-02-29

    This is an issue on which Democrats and Republicans largely agree, yet congress for whatever reason does nothing. Could it be that congress members including Senator Thune are in the pockets of lobbyists and other big money interests to the detriment of their own constituents?

  3. Bob Newland 2016-02-29

    “Could it be that congress members including Senator Thune are in the pockets of lobbyists and other big money interests to the detriment of their own constituents?”

    Now there’s an interesting theory. Surely, you aren’t serious, Ror? I mean, that would be so WRONG.

  4. Stumcfar 2016-02-29

    Detriment of what constituents?? The 7 Democrats in SD who didn’t vote for her??

  5. 90 Schilling 2016-02-29

    The dollars lost is beyond compare to the few millions our teachers need, Ror.

    You ain’t seen nothing yet with E-commerce destroying our sales tax revenue and more importantly our local brick and mortar.

  6. Don Coyote 2016-02-29

    @cah: “Perhaps worth noting: Justice Antonin Scalia concurred with the majority in Quill.”

    Scalia concurred with the majority under the principle of stare decisis (“to stand by things decided.”) not with the majority’s holding under the principle of the dormant commerce clause which Scalia called a “judicial fraud” since it does not appear in the text of the Constitution. Only two justices now remain from Quill, Thomas and Kennedy.

  7. Paul Seamans 2016-02-29

    I have no problem supporting our state with a 4% sales tax. As a rural South Dakotan I do have a problem with paying a 2% sales tax to support a cities projects that I receive very little benefit from. More power to the Amazon’s of the world.

  8. Jenny 2016-02-29

    I spent just over 27 bucks yesterday at my local grocer here in MN. My tax – just 14 cents and that was for the soda. The bread, coffee, milk, coffee creamer and fruit were not taxed. That’s nice isn’t it, SD? You’re being screwed on food taxes.

  9. Curt 2016-02-29

    Jenny – Most of us realize we’re ‘being screwed on food taxes.’ Some of us worked pretty hard a few years ago to put an initiative on the ballot to address that issue. We got trounced pretty badly. Then-Gov Rounds and his loyal henchmen managed to sell voters one of their phony lines of garbage arguing that passage of the initiative would have crippled state govt. Unfortunately logic does not always prevail here in the land of infinite variety.

  10. Douglas Wiken 2016-02-29

    Pushing for state sales taxes on remote sales is supporting an unconstitutional tax that would be a complex mixture of rates, screwed up zip codes, data bases on all kinds of sales, etc. It is a peculiarly stupid idea. In any case, the tax is not lost, it just stays in the pockets of South Dakotans instead of being squandered by dolts in the legislature.

    If there is any kind of a tax on distant or remote sales, it should be a federal sales tax that is 90% rebated to the states on the base of population. That does not require any huge intrusive databases filled with a lot of incorrect information and everybody would know what the tax is.

    I got dumped off SDPB radio for a few years when I wondered in a call-in program how every legislator would like to have 30 states know they had purchased Viagra and the female moderator’s husband had purchased a chastity belt for her. The grotesque over reaction by SDPB perfectly indicated the problems with state consortia on internet and catalog sales.

    Quite often it is impossible to buy the books, tools, clothing etc available easily on the internet from brick and mortar stores. Women have a good example. It is now nearly impossible to find a plain white blouse in SD retail stores.

    The examples used to support a sales tax on internet sales are often pure BS. In any case, we do not need another revenue department with dozens of bureaucrats making sure everybody in South Dakota pays sales tax on the Bibles they buy on the internet.

  11. 90 Schilling 2016-02-29

    Are you saying there are no city services provided for you in Sioux Falls for example, Paul? I’m rural as well but I don’t mind playing by the rules when I’m in your park. I don’t like you charging me your tax rate if you ship me though but that is a minor problem based on Wikens weak comment.

    Wiken, come out from under your rock. If the postal service can hand deliver, you are nuts to believe our SD dept of revenue couldn’t compile a zip code data base to file in a federal system post haste.

    Do I enjoy paying sales tax on large items? Hell no but it keeps the gears turning and I understand that.

  12. Douglas Wiken 2016-02-29

    90Shilings, I am not under a rock. I already know about the difficulties of making sales tax rates work on distant sales. I have a rural address, but if sales tax is charged, I almost always get taxed for the Winner city sales tax which I do not owe. Couple this kind of screwup with multiple states and thousands of corporations involved and it will be a nightmare mess that is totally unnecessary. A federal tax should also apply to sales between me in the boondocks and by telephone or internet with a store in Sioux Falls. The state has already figured out the difficulties of distant sales taxes with newspapers. Initially the tax was supposed to be that of the residence of the buyer. That was soon changed to city of the paper. A state-based internet sales tax is just another good excuse for a large unneeded bureaucracy and privacy invading databases of all kinds.

  13. Wayne B. 2016-02-29

    Paying taxes to the state? Sure.

    But since I live in the country, I shouldn’t be taxed at the city’s rate just because my mail goes through there.

    Online vendors cannot make that distinction well.

  14. Roger Cornelius 2016-02-29

    Why is it that when I buy from Amazon I am charged sales tax?
    Do they charge that tax for the state they are operating in or is it forwarded to South Dakota? Does South Dakota even make an attempt to collect from online businesses that collect sales tax?

  15. Paul Seamans 2016-02-29

    90 Schilling,
    Yes, I am saying exactly that there are no services that I receive from Sioux Falls when I pay their city sales tax. Same thing applies to Murdo.

  16. bearcreekbat 2016-02-29

    Roger, I think it depends on the company that fills your Amazon order. If that company has a physical presence in SD it will assess the tax on your onlinbe order. For example, if you order a guitar off Amazon and the company that fills the order happens to be version of Haggerty’s Musicworks or Sioux Falls Music, you will pay SD sales tax because even though they filled your order online each business has a physical store located in SD, but is the seller is Musician’s Friend or Elderly Instruments with no physical stores in SD you won’t be charged SD sales tax.

  17. Rorschach 2016-02-29

    Paul Seamans, when you go to Sioux Falls you drive on the roads. You benefit from the building, repairing and plowing of those roads. There is a fire department to deal with lit cigarettes you throw out your window. There is a police department to deal with it if you get into an accident. There are water and sewer systems for whenever you use a bathroom. And there are public facilities including the arena, convention center, Washington Pavilion, Howard Wood Field, etc. – some or all of which you have benefited from. You must suffer from some sort of pathology to think that all of these things should be provided to you at no charge. Should Sioux Falls just send your grandkids the bill like the GOP party advocates at the federal level?

  18. Paul Seamans 2016-02-29

    Rorschach,
    You are assuming that I go to Sioux Falls with some degree of regularity, I do not. I fail to see what pathology has to do with the discussion.

  19. Rorschach 2016-02-29

    I didn’t assume anything, Mr. Seamans. You said you receive no services from Sioux Falls when you pay their city sales tax. I pointed out that you are wrong. The idea that someone else should pay for the roads for you to drive on and the public services you benefit from when you’re in Sioux Falls is pathological.

  20. 90 Schilling 2016-02-29

    My Sioux Falls comment was just an example, Paul and if you don’t shop the sewer you don’t pay their taxes. Other than pathological Ror, the examples he used are good. It is great these cities provide services that allow us to enter and make use of whatever our needs are from soup to nuts. They wouldn’t exist without the structures in place.

    As to the few cents difference from town or city to rural address’s we are hearing objections to, I also pay that disparity and 50 years of that wouldn’t make up for the taxes we haven’t paid on Internet sales.

    Goggle maps would have a software system setup by April 1, 2016 if given the task of taxing by location and grumpy old Wiken could wake to spring and saving 1.5 pennies on every order shipped.

  21. crossgrain 2016-02-29

    For whatever its worth, I own a mom-and-pop business that that sells the exact same range of products as a fairly well-known online entity. This online entity has a national advertising campaign, and is seen as the ‘go-to’ for this product, even though what we sell is fairly mundane and commoditized (is that a word? Eh, it is now.) My peeve is that these guys get a 4+% lead right out of the chute. People for some reason would rather pay 4% less on a $1000 order, and have ALL $1000 go out of state rather than chuck me a measly $40 extra, and have ALL that money STAY in South Dakota – hiring labor, paying taxes, volunteering at the school, providing jobs for truck drivers, mechanics, contractors, etc.

    Look, I’m all for equality and innovation, but you lot gotta understand that giving out of state business a 4% head start is pretty much BS if you want Main Street Anytown, SD to remain viable.

  22. Paul Seamans 2016-02-29

    Rorschach, 90 Schilling
    I live in rural Jones County. I pay county property taxes to support roads, schools, and other county services. My township has their own roads, we levy taxes to maintain these roads. I am a member of a fire district, a water district, and an ambulance district. We tax ourselves to fund these districts. I pay these taxes without a whole lot of complaint.

    In the past only our state was able to collect sales tax. As businesses closed in the smaller towns the larger towns became regional centers of trade. I feel that these towns saw the opportunity to keep property taxes low while expanding services by convincing the legislature to let them collect sales tax. First it was one percent, then two percent, and in the legislature this year there was even some talk of raising it to three percent. We people in the rural areas tax ourselves whenever we need funding for services. Should we also be asked to fund these services in the cities?

  23. Rorschach 2016-02-29

    Yes Paul. The police, the fire department, the snow plows, the road crews, the sewers, the water system, the parks and other public facilities are all there for you. When you come to Sioux Falls or Pierre or Rapid City and purchase something you are paying a small amount for public accommodations, and it is only right and fair that you do so.

  24. Paul Seamans 2016-02-29

    Rorschach, the same applies if you come out to rural Jones County. All of these services are available for you to use. The only difference being is that I am not expecting you to contribute to use them, the local folks already have that covered.

  25. Douglas Wiken 2016-02-29

    No matter what SD businesses like to think, people are not buying off the internet to save 4 or 6 percent. Once burned with a price that is two or three times the internet price, we become twice shy about buying anything again. Most of the time local prices are close enough that I will pay extra for timely convenience. But, far too often an article is not available or is twice or three times E-price even with extra shipping charges. An internet tax of any kind is not going to save businesses used to ripping off their local customers. It is also not going to stop shopping for local best prices. Two local stores can have wide price variations on the same product, but it is worth checking because every now and then the local price is the same or less than that out of town or on the internet. Let the buyer beware.

  26. grudznick 2016-02-29

    But Mr. Wiken, as people more and more buy from the computers and drones deliver the magic items in witchcraft-like fashion in minutes to your door, is not the issue that people like me who can’t get out easily or the lazy people or the people who hate Walmart will rather have the nice UPS man ring their bell tomorrow or have the magic drone fly over later today and this natural progression will just bleed out the sales tax dependent governments? That is what the libbies want. We all want to starve the beast but the libbies want to force the beast to enact an income tax and really hammer on the people who work harder and earn more money. The only way an income tax is fair is if it is the same percentage of everybody’s earnings with no exemptions. Tax me a nickle a dollar, tax you a nickle a dollar, even if you go out and make way more dollars in your ways.

  27. larry kurtz 2016-02-29

    John Thune is the Bob Menendez of South Dakota.

    Wells Fargo and others warehouse trillions in the sta…oh look: a squirrel.

    Have a nice blizzard, Pierre.

  28. Happy Camper 2016-02-29

    Convenience and supply demand forces go both ways. Do you know what an Amazon button is? Press the gizmo marked Tide stuck to your washing machine and get an auto order right to your door. It’s just a changing world. Nobody wants to be a plumber any more so we pay $90 an hour that stinks too. It’s not just small town stores Kohl’s and others are closing many locations.

  29. grudznick 2016-02-29

    I fear your blue links, Lar, for they have often in the past pointed to strange porn or malaware sites intended to infect me.

  30. John 2016-02-29

    The only way there will be an internet sales tax is if, and when, sales tax becomes nationalized, as in a value added tax that is present throughout Europe – often at a 14% or more rate. Then watch the faux repubs heads spin off. The US is the most over-retailed nation on earth measured by store fronts per capita, square feet per capita, etc. Even Walmart is now clawing back – after foolishly ignoring the internet. Google, Amazon, et al., are busting the retail over-supply bubble and will continue so doing.
    Corey did a fine job recently showing us what state government denies – that the cost of living in this chrony-corporate paradise is higher than that found in neighboring states. Part of that cost of living is we pay a horrible not-so-hidden transportation tax to deliver goods – which is more economical for retailers than for individuals – yet they rarely pass on bulk transportation savings.
    Douglas is right in that we do not shop on the internet to save 4% – we shop there for selection, convenience, to save time, and to stop being taken on a 2x or 3x retailers ‘Missourah boat ride’.

  31. 90 Schilling 2016-02-29

    Pheasant hunters drive the gravel off my township roads, but, they buy fuel, food and whatever else in my local community, Paul. That community pays nothing into our road funding. But when I go to town, there are services there waiting for my arrival. Remember, those services are a two way street.

    Wiken speaks with an ignorant tongue. An Internet sales front never stocks an item. They are direct shipped from the factory. They don’t pay local taxes, insurance, local wages, utilities, recirculate those dollars or buy everything local school kids have to sell or donate to the same. No town hall support and no local volunteerism. The list is pages long what they the Internet sale doesn’t do for your community. It is easy to point at the backside of the retail counter with ignorance. Thank God for the few left and before you ask, not only no but hell no will I ever do retail again.

    Next time your crapper doesn’t work, Wiken and Happy, call Amazon.

  32. Rorschach 2016-02-29

    Maybe counties should be able to levy a sales tax also to capture revenue from those free riding city folks using all of the rural Jones County services.

  33. grudznick 2016-02-29

    Mr. Rorschach, that’s an interesting idea. I am surprised there are not law bills being voted on right now in the legislatures that would do such a thing.

  34. Happy Camper 2016-02-29

    Google is not the best example to use since they give everything away just to attract users to be a place of commerce. They even provide free phone service.

  35. Donald Pay 2016-02-29

    I haven’t shopped on the internet, except for one thing that I couldn’t buy in stores. I don’t buy of lot of stuff anyway, but when I do, I want to touch it.

    Our old school TV recently died, so we had to buy a newfangled TV. It was around Xmas, so we made it our present to ourselves, as well as taking advantage of sales. I want to see what I buy, learn how to operate it in the store, talk to someone who is knowledgeable and can give me the ins and outs of what I’m looking at, tell me why one is better than the other, and whether the price difference makes any quality difference, and know that if I have trouble setting it up I can call someone for help. I’m a real pest, but a good salesperson is more than willing to help a customer make a good decision. Yeah, I try to do my own research, too, but I want to bounce my ideas off someone else who know more than I. So, as a result of my shopping habits, I don’t buy large items at Walmart or off the internet You know, I never worried about the tax.

    I know a number of people who shop on the internet for almost everything. They send a lot of it back, because it’s not what they want or thought it was. I don’t need the hassle of returning stuff.

  36. leslie 2016-02-29

    yeah, my kids get get an ups package or two every day. they wind up with some ugly shoes I notice:)

  37. 90 Schilling 2016-02-29

    You’re most likely right about Google, Happy. Anyone who gives services for free could not compete with the entrenched government agencies sucking the blood out of your feet as you walk on their streets.

  38. Bob Newland 2016-02-29

    Wiken, your anecdote about getting dumped from SDPB is a classic.

  39. Dan'l Websterification 2016-03-01

    Don’t tax you. Don’t tax me. Tax that man behind the tree.
    The only “fair” tax is one I don’t have to pay.
    We live in an inter-connected world.
    We live in an inter-connected state.
    We live in an inter-connected community.
    We want everything delivered to our door cheaply and efficiently.
    We somehow want all of the services we receive now kept up but we don’t want to have to pay for it ourselves.
    We want connectivity but we want to be rugged individualists.
    Can you skin grizzly, Pilgrim?

  40. Happy Camper 2016-03-01

    In the old days you couldn’t hardly return something to a local store. Their policy was you bought it fool. It took competition from the likes of dying Kmart to change that. All aspects of the internet make living in a small town a lot more appealing and my guess helps keep people in rural areas who would otherwise flee. It’s not just about buying stuff.

  41. 90 Schilling 2016-03-01

    Well spoken, Dan’l. Such is connectivity. It’s ours you can’t charge me more than 29.95. You didn’t build that internet, spoken to the thousands of phone companies providing the flat cost link regardless of the load you put on their system.

    Yes, the best tax is on you.

    Absolutely Hap. I use the internet more than the average person and think every sale should be taxed. It is convenience but don’t lose the baby in the bathwater.

  42. crossgrain 2016-03-01

    “No matter what SD businesses like to think, people are not buying off the internet to save 4 or 6 percent.”

    Uh, yeah, they are. You’re thinking far too narrow in what you think people buy online. You’re thinking TVs or shoes, but what I’m selling is generally a bulk commodity. Many of my clients are businesses and large organizations, and orders often are in the thousands of dollars. Pennies matter at those quantities. I lose bids daily for far less than 4%. That’s not to say I don’t get my fair share of bids, but when we’re comparing apples to apples, and an online seller can match my price and not have to collect tax, I lose the bid and the state loses the money.

  43. Bill Dithmer 2016-03-01

    First, it was small town versus the city. Where I grew up we were 30 miles from the nearest town, Kadoka. The next closest was Martin, 40 miles. When we needed something, it really depended on how bad we needed it or how big of a hurry we were in to get it.

    If we were willing to wait we could go to either town and have someone order it. Many times we went through Kadoka on our way to Rapid and would stop to make sure the retailer didnt have what we wanted, or if they did how over priced they were. It the price was right we always bought local retail. At any rate we still had to go to RC every couple of months so we shopped there quite a bit.

    Then things changed. Fuel got higher priced and those trips to town started to get expensive. If you had to go to town and put in an order, then go back and pick it up we were talking about real money. On the other hand Rapid would most likely have what we wanted and we could touch it before we spent money on it, without waiting, and costing us less in the process.

    Then along comes the net and the big stores in the city got a taste of their own bitter medicine. At a greater and greater pace online orders have been the great equelizer keeping the big box stores somewhat in line, but further depleting small towns who had to spend the same as the rest or us for direct delivery.

    Guess what, those towns in western SD arent getting any closer together. Gas prices are lower now, but that wont last long. In most cases you can have delivery in a couple of days, and you can watch a Youtube video to see how it works.

    Some people probably wouldnt kick at the tax just because of the convenience, but this backdoor approach by the retailers to try to level the playing field has already been decided, hasnt it?

    There are many people like myself, that just hate to go to town. We live a hundred miles from KC, and the same to Des Moines, some twenty miles closer then we used to live from Rapid. Ive been to neither since we’ve been here. We still spend a lot locally, but we buy a lot of things that we would have to fight city traffic for, on the net. I doubt any of that will change.

    Are we seeing a trickle up economy?

    Three quarters of western South Dakota grew up the same way I did. Buying local means something different then it does in eastern SD. The decisions of how and where take on new meanings when all the facts are placed side by side.

    Now, just because its Monday, https://open.spotify.com/track/61xNyBnaJrPPgqf7Ey7N8h

    The Blindman

  44. caheidelberger Post author | 2016-03-01

    You know, instead of wrassling with remote sellers in other states, we could just tax income on people in the state. Problem solved?

  45. Curt 2016-03-01

    OK, Cory, but why not at least reach for the low-hanging fruit and tax corporate income?

  46. Rorschach 2016-03-01

    I don’t know why SD has not instituted a “corporate franchise tax” similar to the bank franchise tax, which taxes corporate income over a certain amount. This could be calibrated to exclude smaller businesses and catch only the big box stores that are used to paying income tax in most other states anyway. That’s the lowest of the low hanging frooot.

  47. Douglas Wiken 2016-03-01

    90 Shilling, stuff it. If our plumbing goes bad, I fix it or I unclog it.

    The national tax rate for distant sales should be the average of all state sales taxes. I don’t know what that would be, but it might be 5%…whatever. It doesn’t need to be 14% and as I indicated 90% of it should be refunded to states on the basis of population. No need for huge databases in multiple states all with large numbers of bureaucrats otherwise unnecessary Federal distant sales taxes could be collected by marketers or collected from buyers with income taxes.

    The SD taxes on catalog sales etc. are based on a judicial fiction held up only because it helps pay judges salaries and protects their retailing buddies whether or not it makes sense or insults the intent of the US Constitution. Our founders saw all the problems with state border taxes under the Articles of Confederation. We do not need to revisit that boondoggle insanity.

  48. caheidelberger Post author | 2016-03-01

    That’s fine with me, Curt! Go where the wealth is, and follow the logic of all the Republican Senators who cried today about not wanting to burden the poor with taxes.

  49. caheidelberger Post author | 2016-03-01

    And Ror is right: we already have a corporate income tax on banks! Extending that tax to other corporations would be fair and easy.

  50. caheidelberger Post author | 2016-03-01

    Douglas, why implement a national average? The database and calculations required to assess local sales tax is trivial compared to the complexity of an online retail operation.

  51. Douglas Wiken 2016-03-02

    Cory, I do not see the relevance of your comment as related to a national sales tax on distant transactions. Everything is simplified by a uniform tax on distant transactions and making it a federal tax makes the playing field level. Distant bulk sales, whatever, buyers and sellers would know what the tax would be and they would know it would be the same for every buyer and seller in a distant tax situation for everybody in the US. Having every marketer forced to know the correct sales tax for every boondock town or city zip code is a totally needlessly complex mess.

  52. caheidelberger Post author | 2016-03-02

    Ah, I see now—a new federal sales tax. I apologize for not catching that. But how does a federal sales tax help the states?

    However, I maintain that assessing correct sales tax for every boondock town or city zip code is not a complex mess. Marketers don’t need to know the rates; they need to download the rate data from the states, plug it into their database, and write two lines of code.

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