PIERRE, United States — Online retail giant Amazon has agreed to begin collecting state and local sales taxes on purchases in South Dakota, Gov. Dennis Daugaard announced Tuesday in his State of the State address.
That is a win for state government, which is heavily dependent on sales tax collections. It comes as a lacklustre fiscal outlook is forcing officials to address a shortfall this year and tamp down spending increases for the next budget cycle.
"It's not going to fix everything, but it's a good start," House Republican leader Lee Qualm said. "Hopefully other companies will jump on the bandwagon."
The news follows recent moves by Amazon in Utah, Iowa and Nebraska as more states push to collect taxes on Internet purchases. The company's website says purchases shipped to over 30 states are subject to sales taxes.
Amazon will begin voluntarily collecting state and local sales taxes Feb. 1 and will remit them starting in late March, Daugaard said.
"Their decision to collect sales tax doesn't solve the sales tax issue for online purchases, but it's a big step in the right direction," Daugaard said during his speech to the Republican-held Legislature on the opening day of the 2017 legislative session.
It is difficult to project how much money the agreement will mean for the state budget until there is a year's worth of history, Daugaard said. He said the company has declined to give the state such information.
Lawmakers will work with economists to project how much money the state can anticipate moving forward, said Republican Sen. Deb Peters, a member of the Senate Committee on Appropriations.
"It's going to alleviate some of the consternation we have with the current budget," she said.
Amazon did not immediately respond to an email requesting comment from The Associated Press.
A 1992 US Supreme Court decision bans states from forcing out-of-state retailers to collect taxes if they don't have a physical presence in the state.
The policy bothers brick-and-mortar retailers, who say it creates unfair competition because they are required to collect the tax. It also frustrates states like South Dakota, which receives much of its revenue from sales taxes.
The agreement means that consumers will have to pay more for their orders if they are not already submitting use taxes when they purchase something sales-tax free.
South Dakota is missing out on $48 million to $58 million annually in state and municipal tax revenues, according to a court complaint filed last year by the state. The lawsuit against several remote retailers is based on a law passed during the 2016 legislative session that requires out-of-state sellers who exceed revenue and transaction thresholds to comply with state sales tax laws.
South Dakota's goal is to ultimately get the high court to overturn its previous ruling. A federal judge is currently weighing whether to send the case back to state court.
By James Nord.