Need more taxpayers, not more taxes
By Gov. Dennis Daugaard
Published: Thursday, December 6th, 2012
The days following Thanksgiving are widely known for launching the Christmas shopping season, as retailer specials draw crowds of shoppers. The shopping days have become so ingrained in our American culture they have earned their own nicknames: “Black Friday,” “Small Business Saturday,” and “Cyber Monday.”
Cyber Monday (Nov. 26) was the date on which online retailers offered large discounts and dramatically boosted their sales. Each year, Cyber Monday sets a new record for money spent online in a single day. This year was no different, with some analysts estimating more than $1.5 billion spent during the 24-hour period. I expect the trend held true in South Dakota as well.
The 2012 Cyber Monday gift-buying binge also likely broke another record: most purchases made in South Dakota without paying sales tax.
Currently, only businesses with a ‘substantial nexus’ or physical presence in South Dakota must collect sales tax on goods purchased online. Out-of-state retailers that are not physically located in South Dakota, have no such obligation. The current system doesn’t make sense and it even discriminates among online purchases. If you buy a new iPod at your local retailer, you pay the sales tax. If you buy it online at BestBuy.com or WalMart.com, you pay the sales tax because those businesses have retail operations in South Dakota. But if you buy your iPod from Amazon.com, you don’t pay sales tax – simply because Amazon has no warehouse or other physical location in South Dakota.
Here’s an even worse example: A customer can walk into a South Dakota business, browse the merchandise, talk to the salesman, then pull out his smartphone, scan the barcode, and order the product from an online retailer – while standing in the store!
Like most South Dakotans, I do not support raising tax rates. However, I do support equity and uniformity among those who make sales to South Dakotans. If South Dakota retailers have to pay sales taxes, their competitors online should as well. This is not a new tax – it is asking online retailers to pay the tax that is already legally due on these sales.
We should be constantly striving to add more taxpayers, not adding more taxes or increasing tax rates. Whether by adding online retailers to the tax rolls, encouraging business growth or getting unemployed folks back to work, we should strive to achieve a broad, stable tax base.
Online shopping has given every South Dakotan access to more goods and services than ever before, if they are willing to pay for shipping. There is nothing wrong with this. We should not, however, disadvantage our local retailers or our state budget by allowing out-of-state online businesses to avoid paying sales tax.
We need Congress to act, and I support Congressional efforts to simplify and standardize remittance of sales taxes collected from online purchases. It creates an even playing field for our local businesses and increases tax revenues the right way- by adding more taxpayers, not more taxes or higher rates.
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