United States

South Dakota: Economic Nexus Sales and Use Tax Bill Passes Both Houses

Mar 07, 2016
From KPMG TaxWatch

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Recently, both houses of the South Dakota legislature passed Senate Bill 106. If approved by the governor, this bill would adopt bright-line tests for when out-of-state sellers would be required to collect and remit taxes on sales to in-state customers. Specifically, sellers with over $100,000 of gross revenue from sales of tangible personal property, products delivered electronically, or sales of services into South Dakota, or sellers engaging in two hundred or more separate South Dakota sales transactions, would be required to collect and remit sales and use tax as if the seller had a physical presence in the state. Legislative findings set forth in the bill indicate that it is designed to spur litigation over the physical presence rule articulated in the Quill decision, which has resulted in a serious loss of revenue for South Dakota, according to the bill. Senate Bill 106 would become effective the first day of the first month that is at least 15 calendar days from the date the bill is signed.

Interestingly, the bill includes provisions designed to resolve any litigation over its constitutionality as soon as possible. Notably, the state may bring a declaratory action in circuit court against any person it believes is required to collect tax under the new nexus standards, to establish that the obligation to remit sales tax is applicable and valid under state and federal law. The circuit court is to act on such declaratory motion as expeditiously as possible; however, the filing of a declaratory action operates as an injunction against the state enforcing the collection obligation (unless the seller consents to collect or voluntarily remits) during the pendency of the action. Any appeal from the circuit court will go straight to the South Dakota Supreme Court and shall also be heard as expeditiously as possible. Please stay tuned to TWIST for future updates on remote seller nexus legislation.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.