What The Supreme Court's Tax Decision Means For South Dakota
SCOTT SIMON, HOST:
The U.S. Supreme Court this week sided with states that want online businesses to collect state sales taxes - used to be if a business sold something online then shipped the merchandise to the customer in a state where the company didn't have a physical presence, the customer was supposed to find out if he or she owed sales tax and then pay it. Well, that often didn't happen. Now, the justices say that collecting that tax for the state is the responsibility of businesses. South Dakota brought this case to court. Attorney General Marty Jackley argued the case and joins us now from Brookings, S.D. Thanks very much for being with us.
MARTY JACKLEY: Thank you, Scott, for having me.
SIMON: Now, I understand South Dakota doesn't have an income tax. So is that why collecting sales tax is particularly important to your state?
JACKLEY: That's right. The sales tax is about 63 percent of our state's general budget. So that's what we used to help on education and other important functions of government. We chose to use the sales tax rather than a state income tax.
SIMON: So the better business has been for online retailers. The worst news, that's been for your state's budget.
JACKLEY: That's exactly right. I mean, the United States Supreme Court has estimated that this is costing South Dakota between $48 and $58 million every year, which is a significant hit to our budget.
SIMON: General Jackley, a personal question - hope you don't mind. Do you order stuff online?
JACKLEY: I do.
SIMON: You're going to pay more for it.
JACKLEY: You know what? And I don't mind that because those Main Street businesses that depend upon the sales - they've been put at a disadvantage. And it's something that South Dakota now has an opportunity to decide whether or not it wants to lower other tax areas or use those dollars for education, health care and infrastructure.
SIMON: Do you have any concern about small businesses in South Dakota? Let's say someone from Sioux Falls or Rapid City, who might sell their goods through eBay or Etsy or Amazon - might they lose business now?
JACKLEY: I don't believe they will because what this decision really does - it just evens the playing field. So when you really look at what the South Dakota legislature did, they put in place safe harbors. They put in place making sure it didn't apply back in time. And we're part of a streamlined sales tax agreement that I think avoids a lot of the concerns that maybe existed in some of the previous United States Supreme Court decisions.
SIMON: I don't know what a safe harbor is.
JACKLEY: What a safe harbor is is a provision that South Dakota put in its law that says this new law would only apply if there's a $100,000 worth of transactions in a year or 200 separate transactions. So for those small mom and pop businesses, the South Dakota collection requirement wouldn't be in place by statute.
SIMON: So someone selling 100 potholders a year on an online platform wouldn't have to pay it.
JACKLEY: That's true unless those were awfully expensive potholders.
SIMON: (Laughter) Marty Jackley, the attorney general of South Dakota, thanks so much.
JACKLEY: Thank you so much for having me.
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