Letter
Oppose Tax Hikes on Online Shopping!
An Open Letter to the South Dakota Senate
February 2, 2011
Dear
Senator:
On behalf of the National Taxpayers
Union’s 1,300 members in South Dakota, I urge you to oppose Senate Bills 146
and 147, which would increase the government burden on online shopping.
SB 146 would impose onerous reporting requirements upon online
retailers to confront customers about their use tax obligations to the state –
which contravenes the intent of the U.S. Supreme Court’s 1992 Quill decision on the tax collection obligations of remote sellers.
SB 147 would expand the definition of retailers to include out-of-state
retailers with a “substantial ownership interest” in an in-state retailer.
Additionally, SB 147’s provisions would apply to out-of-state retailers who
sell “substantially similar products under a substantially similar name.”
Further, an out-of-state retailer that uses an in-state facility or employee to
advertise, promote, or “facilitate” a retail transaction would also be considered
an in-state retailer under SB 147.
States that have attempted to prey upon online
retailers beyond their borders through “affiliate nexus” schemes or use tax
obligation reporting dictates have not raised the desired revenues. In fact, Rhode Island’s tax
administrators say that their treasury has actually lost revenues following enactment of the tax. What these policies
have done is impose high costs on the states through litigation and lost
business activity. Both North Carolina and New York have been sued over this
issue and the litigation continues to this day. In fact, just this week
a U.S. District Judge temporarily enjoined Colorado from enforcing its recent
sales and use tax-reporting requirements for online transactions. Several major
online retailers had already terminated their affiliates programs in Colorado
due to that state’s law. If South Dakota enacts a nexus or new reporting
scheme, an estimated 750 South Dakota affiliates could suffer the same fate. A
loss of business activity that shrinks the tax base is the last thing any
state, especially South Dakota, needs during this time of economic uncertainty.
Instead
of looking for creative ways to levy new taxes or make it harder to do business
in the state, South Dakota could pursue more carefully
focused efforts to better educate consumers about current tax rules. For
example, California’s Board of Equalization has estimated that a letter
campaign reminding taxpayers they may owe use taxes for Internet purchases will
help revenue from these activities grow to $183 million in 2011, $367 million
in 2012, and $600 million annually by 2013. Alabama has tested a similar letter
campaign with stunning success, including instances of taxpayers voluntarily
sending the state checks for several thousand dollars.
According to the Tax
Foundation, South Dakota has the best business tax climate in the nation, which
has drawn many companies and jobs to the state. South Dakota should not
jeopardize this advantage by imposing a new tax on online shopping. Therefore,
our members hope you will reject any proposal to do so.
Sincerely,
John
Stephenson
State
Government Affairs Manager
CC: Governor Dennis Daugaard, Speaker Val Rausch
