2018 SPECIAL SESSION BRIEF
September 12, 2018
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8/23/2018 as amended
BILL 1
- In 2016, the SD Legislature passed nationally important legislation via SB 106.
- SB 106 was deliberately written to challenge Quill Corp v. North Dakota, a U.S. Supreme Court decision which stated a business with no physical presence in a state is not required to collect sales taxes.
- SB 106 was successful and on June 21, 2018, the U.S. Supreme Court ruled in favor of South Dakota.
- Bill 1 removes the injunction which is preventing South Dakota from implementing the law requiring remote sellers to collect sales taxes.
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WHY LEGISLATION NOW?
- Gives enough time to communicate effectively to remote sellers and other stakeholders to ensure a smooth implementation.
- Permits South Dakota to implement our remote seller law as other states have done.
- Provides tax fairness between remote sellers and brick-and-mortar businesses.
Source: Sales Tax Institute
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BILL 1
- Section 1: Explains the main purpose of SB 106 - allowing the State to sue remote sellers to challenge the physical presence rule - has been fulfilled.
- Section 2: Removes State's ability to sue remote sellers - no longer necessary.
- Section 3: Removes the injunction against all remote sellers except the defendants in South Dakota v. Wayfair (Wayfair, Overstock, and Newegg).
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BILL 1
- Section 4: Provides an implementation date of November 1, 2018.
- Section 5: Clarifies the injunction application to the defendants in South Dakota v. Wayfair. When lawsuit ends, they will be required to collect and pay from that date forward.
- Section 6: Emergency clause makes the bill effective upon signing.
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QUESTIONS?
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BILL 2
- Allows and requires on-line marketplace providers to collect and remit sales taxes on behalf of sellers using the marketplace.
- A marketplace provider is an electronic platform used by sellers of goods and services.
- A marketplace provider differs from a marketplace seller.
- Marketplace provider – an online platform connecting sellers and buyers and facilitating the sale (Examples: eBay, Etsy, Amazon, etc.)
- Marketplace seller – a seller of one's own inventory, while using a marketplace provider.
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WHY LEGISLATION NOW?
To date, 8 states have passed legislation specific to marketplace nexus.
MARKETPLACE NEXUS LEGISLATION
Source: Sales Tax Institute
- Gives marketplace providers appropriate time to prepare.
- Provides efficiency for small businesses in South Dakota and across the nation that utilize marketplace providers.
- Other states passing marketplace legislation have similarly delayed implementation dates.
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BILL 2
- Sections 1 - 4: Defines marketplace, marketplace provider, marketplace seller, retailer, and person.
- Section 5: Requires a marketplace provider to collect and remit sales tax on all sales it facilitates for a marketplace seller, if the sales thresholds are met.
- Uses the same thresholds as SB 106 ($100,000 sales/200 transactions).
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BILL 2
- Section 6: Establishes a hold harmless provision for marketplace providers due to inaccurate information from a marketplace seller.
- Sunset date of June 30, 2024, for this provision.
- Section 7: Establishes the effective date of March 1, 2019, for this bill.
- Marketplace providers can voluntarily comply at any time prior to March 1.
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TYPES OF MARKETPLACES
- Fulfillment service: The marketplace connects sellers to buyers and handles all transaction aspects (order, payment, warehousing, and shipping).
- BILL 2 applies to this type of marketplace provider.
- Example: Amazon Marketplace - process order, collect payment, ship for sellers.
- Facilitator: The marketplace connects sellers to buyers and processes order and payment. The marketplace seller is usually responsible for shipping.
- BILL 2 applies to this type of marketplace provider.
- Example: eBay and Etsy - collect and pay for all sellers.
- Virtual classified ads: The marketplace advertises goods and services for sale and connects sellers to buyers but has no other involvement with the transaction.
- BILL 2 does NOT apply to this type of marketplace.
- Example: Craigslist
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QUESTIONS?
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