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Online ruling boosts South Dakota’s sales tax revenue

July 1, 2019

SIOUX FALLS, S.D. (AP) — South Dakota has seen an uptick in sales tax revenue following a Supreme Court decision that allows it to collect money from online retailers.

The June 2018 ruling required out-of-state online businesses to pay sales taxes if they conduct at least $100,000 in gross sales in at least 200 transactions in the state. The 5-4 ruling was made in a case between South Dakota and several online retailers, including the home goods company Wayfair.

Before the ruling, many sellers that have a physical presence in only a single state or a few states had been able to avoid charging sales taxes when they shipped to addresses outside those states.

After the law went into effect Nov. 1, the state issued 3,382 business tax licenses, which helped generate nearly $16 million in tax revenue, said Jim Terwilliger, secretary of the state Department of Revenue.

“The Wayfair decision is really a landmark decision in the tax administration world, and that really helps the state of South Dakota,” Terwilliger told the Argus Leader. He said the move will help the state preserve its strong sales tax system in the long term as consumers increasingly make online purchases.

The ruling also allowed states to pass laws requiring out-of-state sellers to collect the state’s sales tax from customers and send it to the state. Thirty-one states have since enacted legislation allowing them to collect sales taxes from online businesses.

A South Dakota law that went into effect March 1 requires companies that provide a platform for sellers, such as E-Bay and Amazon, to pay online sales taxes.

But even with these laws in place, it’s too early to determine if the state’s tax revenue will level off or how it’ll affect the state’s bottom line, Terwilliger said.

He expects to see a tax revenue bump for the first or second year because the state is still piling up tax revenue from businesses that weren’t previously licensed.

Sioux Falls has had strong growth in sales tax this year and is seeing an upward trend in its 12-month average, according to the city’s finance director, Shawn Pritchett.

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Information from: Argus Leader, http://www.argusleader.com

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