South Dakotans may see lower sales tax rate after tax ruling

Minnesota Brick-and Mortar Retailers Welcome Supreme Court Ruling on Online Sellers

Shopping online is about to get more expensive. The cases the court overturned said that if a business was shipping a product to a state where it didn't have a physical presence such as a warehouse or office, the business didn't have to collect the state's sales tax.

How will this affect your wallet? "This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both". This would amount to substantial savings for shoppers.

States around the nation are expected to follow suit on collecting taxes directly from internet retailers - regardless of where they are located - now that the Supreme Court has opened the gate. If a business had a physical presence in a state, then they could be forced to collect sales tax at the time of purchase. "SC already collects (sales tax) on 22 of the top 25 e-retailers".

Amazon isn't the only Seattle company indirectly impacted by the Supreme Court decision. Legislative action has been stalled while the Supreme Court was deciding this case.

Samsom said the Tax Department will be working with legislative fiscal analysts and economists for more firm estimates of what the decision is likely to mean for state coffers.

Why it matters: States had long complained that they were losing out on billions of dollars in lost tax revenues, and that the old rules failed to recognize the growing importance of the internet economy.


"Startups and small businesses may benefit from the physical presence rule, but here South Dakota affords small merchants a reasonable degree of protection", the ruling says. Now, rivals will be charging sales tax where they hadn't before.

"We were hoping one way or another it would be overturned, either by the Supreme Court or Congress", he said.

States were eager to collect the estimated $13.4 billion in annual revenue they could potentially glean from charging online sales taxes. The problem isn't the tax rates, but rather the administrative burden that goes with collecting and paying those sales taxes. The 5 to 4 majority decision handed down by the US Supreme Court this week has local retailers smiling.

Many locally owned businesses in Vermont have hoped for a change in the law.

The National Retail Federation called the decision "a major victory" for retailers.

Consultants like Mark Grinis, partner, global real estate at EY, said he did not expect a surge in demand for stores even if prices ticked up for online businesses.

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