State lawmakers approve online sales tax measures in special session

PIERRE, S.D. (KSFY) - South Dakota Governor Dennis Daugaard signed his final bill into law Wednesday after a special legislative session in Pierre.

It is a law decades in the making and one that went all the way to the U.S. Supreme Court.

Wednesday's special session was a celebration of the state's victory in the U.S. Supreme Court this summer, upholding South Dakota's 2016 law to begin collecting sales tax from online retailers.

"The Supreme Court cannot just change its ruling on its own, it needs someone to bring the right case to the court. That’s where South Dakota comes in," Daugaard said.

The Supreme Court ruling paves the way for all states to begin collecting online sales tax.

"Twenty-two states have announced an effective date for collection and many more are working," Daugaard said.

But, as the state spearheading the case, an injunction from the Supreme Court lawsuit was still preventing South Dakota from doing the same. It is why Daugaard called the special session for Senate Bill 1 and 2.

"Today we are able to implement that win and it turn into a better law for South Dakota, a better even playing field for those doing business in their home communities, who have stores and have been paying property taxes and sales taxes all these years now won’t have unfair competition from online," Daugaard said.

The South Dakota Retailers Association played a key role in the passage of the 2016 State Law and the Supreme Court Case, telling lawmakers online retailers had an unfair advantage by not collecting sales tax.

"It's been a dream of the South Dakota Retailers Association, and tax equity is finally accomplished in South Dakota," Jim Hood, a lobbyist for the association, said.

While retailers and other supporters celebrate the new laws, there were a handful of "no" votes.

"The reason why we had the special session now is because they wanted it to go into effect for the holiday season, so Merry Christmas South Dakota, you just got a tax increase," Republican Senator Stace Nelson said.

The few people who voted against SB 1 and SB 2 largely objected on behalf of buyers.

"You can do the math, if you weren't paying the tax before, and didn't have to, and now you're going to have to, it's a new tax," Nelson said.

But supporters and other state leaders said these new laws help enforce the state's existing use tax.

"That is something that you should be individually remitting to the state of South Dakota, it's not going to change the law," Sen. Deb Peters said. "SB 1 and SB 2 doesn’t change use tax law, it’s been on the books since 1939."

"Most South Dakotans don’t, they probably don’t know they have to, the Department of Revenue only received 81 individual tax remittance forms last year," Daugaard said.

Beginning Nov. 1, nearly all online retailers who do more than $100,000 in sales will begin collecting and remitting those use taxes to the state, just like retail stores.

Peters said the Department of Revenue pays for a service provider that will automatically collect and remit those taxes to the state. It is a free contracted service for retailers.

SB 2 applies to online marketplaces like Ebay or Etsy that will be able to collect these state taxes for the third party sellers on their site. That laws goes into effect in March.

The Department of Revenue said it does not apply to connection sites like Craigslist or Facebook.