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SB 30: Remove 200-Sale Criterion from Remote Seller Tax

The Legislature will consider simplifying the criteria for determining when an out-of-state online vendor must collect and remit South Dakota sales tax.

Right now, remote sellers must start collecting South Dakota sales tax when, in one calendar year, they have sold more than $100,000 worth of goods to South Dakotans or have made 200 sales to South Dakotans.

The Department of Revenue wants to strike that second criterion. Senate Bill 30 would remove the 200-transaction criterion from SDCL 10-64-2. That could be a nice tax break for smaller online vendors and their customers; right now, a company could sell ice-fishing mittens (from Florida!) to just 200 South Dakotans and end up having to collect and remit sales tax to Pierre on just $20K of actual sales.

Interestingly, SB 30 does not propose any increase in the $100K threshold, which was written into law in 2016. If we index by Consumer Price Index, $100K in 2016 sales would be equal to about $123K in sales today. Leave that $100K threshold untouched, and South Dakota’s remote sales tax will gradually ensnare smaller and smaller businesses. So maybe we don’t need a minimum-transaction threshold; eventually the fixed dollar threshold will put all remote vendors on South Dakota’s sales tax roll.

Removing the 200-transaction threshold could make it easier for some businesses to temporarily escape the sales tax roll. Suppose an online company sells more than $100K to South Dakotans for the first time in 2023. That company has to get a sales tax license and collect and remit sales tax on all sales above $100K this year. That company will have to pay sales tax on all purchases next year as well, even if the company’s 2024 sales don’t reach $100K. Under current law, if the company’s 2024 sales drop below $100K but it makes 200 or more transactions with South Dakotans, it will continue to pay sales tax on every sale in 2025. Pass SB 30, and that company could make 200 or more sales in 2024 but, with 2024 total SD sales below $100K, could fall off the sales tax roll and skip collecting sales tax in 2025.

5 Comments

  1. Richard Schriever 2023-01-11 12:45

    So, as it is, some vendor in NE say – could sell 199 $200,000 combines, or 199 $70,000 pick ’em ups to SDn’s and so long as the deal was made “online”, not collect any sales tax from anyone or pay any to any state?

  2. Mark Anderson 2023-01-11 13:52

    They want to get rid of the 199 companies. It’s like when we hired a guy who called himself The Third Nail. He put a third nail where there were two in our roof for our new insurance rates, all because of the legislature. He only worked the cooler months. He was a cool guy.

  3. P. Aitch 2023-01-11 14:23

    @Mark – I’m reading Hiaasen’s humorous novel “Stormy Weather” about what happens to roofing shysters in Florida, after a big blow storm when citizens go looking for the crooks that sold them defective homes and trailer homes.

    There’s a character that’s modeled on Cory’s grudznick named Snapper.

  4. John 2023-01-11 20:18

    This threshold ought be indexed to inflation. It’s lazy and ludicrous that the legislature failed to index the threshold to inflation.

  5. Richard Schriever 2023-01-12 11:46

    John – that math is HARD!!

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