Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

Internet Sales Can Be Taxing

Earlier this month, South Dakota lawmakers put into effect a tax on out-of-state online retailers that now requires them to collect state sales tax from customers on internet sales. The law affects those retailers who have done business in the state to the tune of $100,000+ or 400 transactions or more.

I know what you are thinking. Why do I care? I don’t live in South Dakota. Well, the truth is, it looks like South Dakota may be used as a test state to support opposition of a Supreme Court ruling from the early 1990s (Quill vs. North Dakota). The ruling stated that it would be too taxing (see what I did there?) for retailers to enforce the different state sales taxes. However, with the advancements in technology, it is much more feasible to implement software programs and apps to figure out the different rates to be charged to each state’s residents.

Proponents of the tax say that it will help bring customers back to local brick and mortar stores that have always been required to charge sales tax and help the state regain revenues that it has lost since the boom of internet shopping.

Now don’t expect this law to go nationwide anytime soon. It has only been enacted for a couple days and has already spawned two lawsuits that say the law is in violation of the previously mentioned Supreme Court ruling. However, if you enjoy online shopping as much as I do, keep in mind that you may eventually be paying your state’s sales tax there as well.

By Joanna Yergler