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Governor might call special session over sales tax ruling

July 25, 2018

PIERRE, S.D. (AP) — South Dakota Gov. Dennis Daugaard might call a special legislative session after a recent U.S. Supreme Court ruling in the state’s favor that could yield millions of dollars in online sales taxes.

The governor’s chief of staff, Tony Venhuizen, said in an email this week that Daugaard has informed legislative leaders a special session might be needed later in the summer or early fall to expedite the ruling’s implementation. The Republican governor wanted to notify officials that new legislation could be required, Venhuizen said.

He said in an interview that one example could be creating a license for websites that provide marketplaces for other merchants — but don’t sell products themselves — to collect sales taxes for the retailers that use the platforms.

“If we want to move quickly to implement this and to capture the online activity that’s going on, that could easily be something that we need to consider implementing sooner than later,” Venhuizen said.

House Majority Leader Lee Qualm, a Republican, said he needs more information about the changes that would be made and whether the issue can wait.

“We are looking at potential dates, what works for everybody, and I’m just waiting for the governor to give more specifics as to why this should be a special session,” Qualm said.

State lawmakers and a new governor will gather for the 2019 legislative session in January. Republican Kristi Noem and Democrat Billie Sutton are campaigning to succeed Daugaard, who cannot run again because of term limits. The last special session was held in 2017.

South Dakota currently can’t enforce its requirement that out-of-state retailers collect sales taxes as state-level legal proceedings continue. The obligation applies to sellers outside the state who do more than $100,000 of business in South Dakota or more than 200 transactions annually with state residents.

It was a South Dakota case that led to the U.S. Supreme Court’s decision in June to overturn two decades-old high 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. South Dakota has estimated it loses about $50 million annually to e-commerce.

State law requires a 2016 sales tax hike for teacher pay be scaled back if the state is able to collect tax on the online purchases. Under the law, the state’s 4.5 percent rate is to be rolled back by one-tenth of a percent for every additional $20 million the state reaps, with a floor of 4 percent.

Venhuizen told the Legislature’s budget-writing committee on Wednesday that if lawmakers plan to carry out the law as intended, certain provisions need to be clarified.

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