Aberdeen Business Doesn’t Want to Pay Online Sales Tax to Other States
By Cory Allen Heidelberger on 2018-03-18
Both of South Dakota’s Republican gubernatorial candidates are pushing to collect sales tax from out-of-state online vendors. One Aberdeen businesswoman is pushing back.
Laure Swanson, trying to keep a low profile from other states’ sales tax collectors… (from Laure Swanson, public Facebook post, 2015.07.24).
Larger companies can handle the Remote Transaction Parity Act, Swanson said. But it would be a challenge for small businesses like the four she and her husband Dirk own. They include Swanson Electric, RC Hunting Store, Extended Stay Suites and S&S Rentals.
RC Hunting Store is an online company with a local warehouse. Swanson said its sales are nationwide and international. The resolution would mean working with 9,600 state and municipal jurisdictions to determine what level of sales tax would need to be collected, she said.
“I feel if we don’t have a presence in those communities we shouldn’t remit sales tax on it,” Swanson said.
She said her company uses eBay to sell products, and so do 676 other Brown County businesses, according to information she received from eBay. They would all be affected by the Remote Transaction Parity Act, she said [Elisa Sand, “Businesswoman Asks Thune to Oppose Proposed Sales Tax Collection Regulations,” Aberdeen American News, 2018.03.17].
Uh oh—this Republican businesswoman’s cry of unfairness raises a fairness issue that the Republicans pushing online sales tax haven’t said much about: if South Dakota gets to wring sales tax out of New York companies selling stuff to South Dakotans, it’s only fair that New York get to wring sales tax out of South Dakota companies like Swanson’s selling stuff online to New Yorkers. Her statement that sellers with no “presence” in the buyer’s community shouldn’t have to remit sales tax undercuts exactly the argument that Attorney General Marty Jackley will be making before the United States Supreme Court next month in defense of South Dakota’s own Main Street Fairness Act (2016 SB 106).
Essentially, Swanson is citing the basis of the 1992 Quill decision that Jackley is hoping to overturn. According to NCSL, the Supreme Court felt that it was too complicated for nationwide remote sellers to comply with varying state and local tax laws. South Dakota’s contention is that in 26 years, the Internet has grown from its geeky infancy to regular staple of daily life. We’ve noted previously that instead of dealing with nearly 10,000 different tax laws, online vendors really would only deal with 22 regulations to pay sales tax everywhere they sell. 23 states, including South Dakota, are full members of the Streamlined Sales Tax Agreement, which makes charging sales tax among those states much simpler. For states not participating in that Streamlining, Noem’s HR 2193 requires that sellers receive free access to national certified sales tax software. To collect any tax on Swanson’s sales, non-Streamlined states like New York or Illinois would have to install and maintain that automated tax-calculation software on Swanson’s computer.
But wait a minute—that software shouldn’t have to go on Swanson’s computer. She said she sells her stuff on eBay, so eBay would be running all the sales tax software, calculations, and processing. Swanson should lose no time complying with any measures other states might pass under Noem’s HR 2193 to reciprocate with South Dakota’s remote sales-tax grab. She only loses the price advantage she gets by dodging the sales tax her remote customers would pay on Manhattan’s Fifth Avenue or Chicago’s Magnificent Mile.
Jackley, Noem, and other tax-raising South Dakota Republicans could also spare Swanson some grief by encouraging other states to reciprocate with the provisions we would enact in 2016 SB 106. If Jackley persuades the Supreme Court to overturn Quill, South Dakota will impose its online sales tax only on vendors who e-sell more than $100,000 worth of stuff to South Dakotans or who make more than 200 e-sales to South Dakotans (see 2016 SB 106 Section 1). If Swanson is selling more than $100,000 of hunting gear to Minnesotans or getting more than 200 ship-clicks from any one state, then (a) more power to her, and (b) she’d better back Noem’s bill so she or eBay can get that free tax-compliance software.
Swanson’s complaint does raise the question of whether the Republican electorate in general is pleased with Noem’s and Jackley’s separate but complementary efforts to collect more sales tax. Noem’s legislation and Jackley’s lawsuit put them on an equal footing and thus negate any distinction primary voters might make. But come November when all voters have to choose our next Governor, Democrat Billie Sutton (who voted for the 2016 SB 106 tax increase along with every other Senator) will be able to counterprogram the Republican “low-tax/no-tax” mantra by pointing out that the Republican nominee has fought as hard as anyone else to make businesspeople like Swanson pay more sales taxes not just to South Dakota but to other states.
This lady is right. The fairness act will if passed will do nothing to help Main Street. The internet is the new mall and it is about election and ease of shopping.
Does any one know how big the Amazon sales tax check is? Can not be that big since no republican is bragging about it.
Richard Schriever
2018-03-18 12:24
Oh good grief – a small office of employees (maybe 5 people) could EASILY be able to keep up with all state and local sales tax laws and amounts and feed them into an EASILY linked-to on line app that online retailers could pay a small fee to (like they do for ALL credit card purchases) to automatically calculate the tax – collect it and forward to the appropriate states. Seriously – it’s not that complicated – at least not for anyone who has even modest database administration skills. Seriously.
D Basel
2018-03-18 12:56
Years ago, before the internet, I bought product from a Texas Co. They charged state sales tax and city sales tax. I called them on it and said I did not live in a city that had a sales tax. The reimbursed me. So who keeps track of all the sales taxes that should be collected in internet sales. The state would have to add a lot of people to keep track. Not only states but cities. Then does the tax include food, or entertainment, or does it need to include airport tax or stadium taxes. I just paid sales tax for a stadium in Lincoln, NE.
I’m sure that there’s a software package (if not, get out there and make one) that would calculate the applicable tax based simply on the buyer’s zip code.
…and again, the Noem bill that Swanson is protesting would make that software available for free to every retailer, courtesy of the jurisdictions for whom she would collect sales tax.
Sam, I’m curious now about this two-way flow. I wonder how much South Dakota retailers sell online to folks in other states. If SCOTUS overturns Quill and if Congress passes Noem’s bill, the sales tax South Dakota businesses collect and remit to Minn, NY, Calif, etc. wouldn’t mean a net revenue loss for South Dakota businesses; they’d just tack the tax onto their customers’ bills. But I wonder what marginal decline in sales that online sales tax would cause among customers who see the no-sales-tax advantage disappear and decide to shop at a local brick-and-mortar store? If online sales tax does depress online sales, I would think South Dakota would come out ahead, since there are probably more South Dakotans buying more stuff from out-of-state vendors than there are South Dakotans selling stuff to out-of-state buyers.
Francis Schaffer
2018-03-18 14:54
I would prefer to shop at a local store, yet there are just some types of businesses which can not survive locally, bookstore, clothing store, shoe store, department store, for examples.
o
2018-03-18 16:24
Did business do this to themselves? By creating a business model that focused on undercutting the other guy in price (and expelling/underpaying workers to make that profit margin), and creating a “need” for near infinite selection, hasn’t business made shopping local antithetical to the tenants they trained consumers to seek?
The money in our pockets, like the minerals in the soil, are only a resource for the wealthy to mine from America. A functioning, thriving community is of no concern against corporate (CEO/stockholder) profit.
Nick Nemec
2018-03-18 19:10
I for one enjoy sticking it to the State of South Dakota by not paying sales tax on online sales. If we must pay online sales tax make it a uniform Federal tax remitted back to the states on a per capita basis.
Or maybe South Dakota could adopt a different, more broad based tax structure.
P. is Me
2018-03-18 22:05
So what’s the difference between purchasing a product online in Nebraska or driving over state lines to make the purchase? If you purchase online you get charged a tax, but if you drive you do not. So what’s next, tax toll booths to collect the taxes that an out of state resident didn’t pay? I’m really having a hard time accepting this online tax proposal.
P., if we drive to Nebraska, we pay sales tax. When Nebraskans come here, they pay sales tax. 2016 SB 106 and Noem’s HR 2193 would make tax apply to online sales the same way it applies to in-person sales.
grudznick
2018-03-19 08:58
Sic the tax collectors on the deadbeats like Mr. Nemec. Pay your taxes, people, or no government for you!
jerry
2018-03-19 09:26
Quick, someone get her out of the republican party! Doesn’t she know that regulation loving republicans like NOem and her ilk are not bringing this odious requirement in to bring money to the state, NOem is in it to eliminate small business sales to out of state commerce. NOem proposes a law that has no solution for small business to collect the tax on the 10,000 possible locations that use the internet for the possibility of sales. It looks like who NOem is shilling for is Intuit or H an R Block for the software requirements that small business people, like this lady will have to purchase to try to navigate the sales she makes. These would then be updated each year or maybe more, to purchase to stay in compliance. Then, there are the audits that you could be subject too as well as the exposure to lawsuits that involve other state’s business. NOem has come up with some stupid stuff, but this one is a small business killer. Thanks to Ms. Swanson for standing up. Now she should consider a party switch as the one she is presently in, has shown once again they are not for small business but only for their handlers.
ken
2018-03-19 15:34
It is NOT TRUE that simply using software or having eBay calculate taxes is all you need. A small business that sells on their own website, storefront, and eBay must go through the complicated process of combining all these taxes and reporting to the 45 states with sales tax. (don’t pretend that it is only the 22 in the streamlined states, all states want in on this). It takes about two hours per month to manage tax for on state. 45 state is easily 50+ hour work. The “free software” simply does not do this. That free software only works well if you are selling just on eBay or Amazon. The $100,000 threshold sounds like a lot, but it assumes sales are $500 each. Many online sales are about $20 each. This takes the threshold for compliance down to a level that puts every online small business out of business unless they only sell on Amazon or eBay or are just a small hobby seller. But I am sure that isn’t intended (sarcasm).
Ken raises an interesting point: Noem’s bill seems to be written to push every retailer to use Amazon or some other selling platform rather than just doing it themselves. Did Bezos lobby for that incentive?
Nick Nemec
2018-03-19 17:06
Ms. grudznick, I pay every penny of tax I am assessed. I just enjoy not being assessed sales tax for online sales, and I don’t weep for South Dakota failing to get every pound of flesh they feel they are owed. If this is an important enough issue to warrant a Congressionally approved solution the least Congress can do is devise a simple solution, i.e. a Federal sales tax on internet sales divided on a per capita basis between the various states.
This lady is right. The fairness act will if passed will do nothing to help Main Street. The internet is the new mall and it is about election and ease of shopping.
Does any one know how big the Amazon sales tax check is? Can not be that big since no republican is bragging about it.
Oh good grief – a small office of employees (maybe 5 people) could EASILY be able to keep up with all state and local sales tax laws and amounts and feed them into an EASILY linked-to on line app that online retailers could pay a small fee to (like they do for ALL credit card purchases) to automatically calculate the tax – collect it and forward to the appropriate states. Seriously – it’s not that complicated – at least not for anyone who has even modest database administration skills. Seriously.
Years ago, before the internet, I bought product from a Texas Co. They charged state sales tax and city sales tax. I called them on it and said I did not live in a city that had a sales tax. The reimbursed me. So who keeps track of all the sales taxes that should be collected in internet sales. The state would have to add a lot of people to keep track. Not only states but cities. Then does the tax include food, or entertainment, or does it need to include airport tax or stadium taxes. I just paid sales tax for a stadium in Lincoln, NE.
I’m sure that there’s a software package (if not, get out there and make one) that would calculate the applicable tax based simply on the buyer’s zip code.
…and again, the Noem bill that Swanson is protesting would make that software available for free to every retailer, courtesy of the jurisdictions for whom she would collect sales tax.
Sam, I’m curious now about this two-way flow. I wonder how much South Dakota retailers sell online to folks in other states. If SCOTUS overturns Quill and if Congress passes Noem’s bill, the sales tax South Dakota businesses collect and remit to Minn, NY, Calif, etc. wouldn’t mean a net revenue loss for South Dakota businesses; they’d just tack the tax onto their customers’ bills. But I wonder what marginal decline in sales that online sales tax would cause among customers who see the no-sales-tax advantage disappear and decide to shop at a local brick-and-mortar store? If online sales tax does depress online sales, I would think South Dakota would come out ahead, since there are probably more South Dakotans buying more stuff from out-of-state vendors than there are South Dakotans selling stuff to out-of-state buyers.
I would prefer to shop at a local store, yet there are just some types of businesses which can not survive locally, bookstore, clothing store, shoe store, department store, for examples.
Did business do this to themselves? By creating a business model that focused on undercutting the other guy in price (and expelling/underpaying workers to make that profit margin), and creating a “need” for near infinite selection, hasn’t business made shopping local antithetical to the tenants they trained consumers to seek?
The money in our pockets, like the minerals in the soil, are only a resource for the wealthy to mine from America. A functioning, thriving community is of no concern against corporate (CEO/stockholder) profit.
I for one enjoy sticking it to the State of South Dakota by not paying sales tax on online sales. If we must pay online sales tax make it a uniform Federal tax remitted back to the states on a per capita basis.
Or maybe South Dakota could adopt a different, more broad based tax structure.
So what’s the difference between purchasing a product online in Nebraska or driving over state lines to make the purchase? If you purchase online you get charged a tax, but if you drive you do not. So what’s next, tax toll booths to collect the taxes that an out of state resident didn’t pay? I’m really having a hard time accepting this online tax proposal.
Isn’t this taxing a tax???
P., if we drive to Nebraska, we pay sales tax. When Nebraskans come here, they pay sales tax. 2016 SB 106 and Noem’s HR 2193 would make tax apply to online sales the same way it applies to in-person sales.
Sic the tax collectors on the deadbeats like Mr. Nemec. Pay your taxes, people, or no government for you!
Quick, someone get her out of the republican party! Doesn’t she know that regulation loving republicans like NOem and her ilk are not bringing this odious requirement in to bring money to the state, NOem is in it to eliminate small business sales to out of state commerce. NOem proposes a law that has no solution for small business to collect the tax on the 10,000 possible locations that use the internet for the possibility of sales. It looks like who NOem is shilling for is Intuit or H an R Block for the software requirements that small business people, like this lady will have to purchase to try to navigate the sales she makes. These would then be updated each year or maybe more, to purchase to stay in compliance. Then, there are the audits that you could be subject too as well as the exposure to lawsuits that involve other state’s business. NOem has come up with some stupid stuff, but this one is a small business killer. Thanks to Ms. Swanson for standing up. Now she should consider a party switch as the one she is presently in, has shown once again they are not for small business but only for their handlers.
It is NOT TRUE that simply using software or having eBay calculate taxes is all you need. A small business that sells on their own website, storefront, and eBay must go through the complicated process of combining all these taxes and reporting to the 45 states with sales tax. (don’t pretend that it is only the 22 in the streamlined states, all states want in on this). It takes about two hours per month to manage tax for on state. 45 state is easily 50+ hour work. The “free software” simply does not do this. That free software only works well if you are selling just on eBay or Amazon. The $100,000 threshold sounds like a lot, but it assumes sales are $500 each. Many online sales are about $20 each. This takes the threshold for compliance down to a level that puts every online small business out of business unless they only sell on Amazon or eBay or are just a small hobby seller. But I am sure that isn’t intended (sarcasm).
Ken raises an interesting point: Noem’s bill seems to be written to push every retailer to use Amazon or some other selling platform rather than just doing it themselves. Did Bezos lobby for that incentive?
Ms. grudznick, I pay every penny of tax I am assessed. I just enjoy not being assessed sales tax for online sales, and I don’t weep for South Dakota failing to get every pound of flesh they feel they are owed. If this is an important enough issue to warrant a Congressionally approved solution the least Congress can do is devise a simple solution, i.e. a Federal sales tax on internet sales divided on a per capita basis between the various states.
I won’t go after Nick for dodging taxes until he starts hiding from Uncle Sam in his RV. :-)