PIERRE (AP) – South Dakota residents may see lower sales tax rates because of a provision in state law passed years ahead of a U.S. Supreme Court decision allowing states to make online shoppers pay it.
It was a South Dakota case that led to Thursday’s high court decision, which opens the door for consumers to see sales tax on more online purchases and eventual reductions in the state sales tax rate that were built into a 2016 tax hike to raise teacher pay. The ruling overturned two decades-old Supreme Court decisions that have made it tougher for states to collect sales taxes for certain purchases online, a situation they said costs them revenues each year.
The cases the court overturned said that if a business was shipping a customer’s purchase to a state where the business didn’t have a physical presence such as a warehouse or office, the business didn’t have to collect sales tax for the state.
In South Dakota, lawmakers in 2016 boosted the state’s sales tax rate from 4 percent to 4.5 percent, but required the increase to be scaled back if the state could ever collect from out-of-state online retailers.
Two years later, that’s on the horizon. Republican state lawmaker Jeff Partridge, who sponsored the provision in the teacher pay measure, said he’s looking forward to the “prospect of a tax cut for the citizens of South Dakota.”
The law calls for a one-tenth percent rate cut per $20 million in new state revenue from purchases through online retailers. South Dakota has estimated it loses about $50 million annually to e-commerce.
The Supreme Court ruled Thursday in South Dakota’s favor after the state sued several online retailers in 2016 based on a separate law seeking to get them to collect the tax. It sent the law back to South Dakota’s highest court to be revisited.
State officials praised the decision. Attorney General Marty Jackley said it was a win for South Dakota and for “Main Street businesses across America that will now have a level playing field and tax fairness.”
AP photo
