WASHINGTON | The Supreme Court agreed Friday to wade into the issue of sales tax collection on internet purchases in a case that could force consumers to pay more for certain purchases and allow states to recoup what they say is billions in lost revenue annually.
The case the Supreme Court agreed to hear comes from South Dakota, which has no state income tax and relies on retail sales and use taxes for revenue. In 2016, South Dakota lawmakers passed a law requiring out-of-state sellers to collect and turn over sales tax to the state. The state's highest court struck down the law, citing previous Supreme Court decisions.
Under previous Supreme Court rulings, when internet retailers don't have a physical presence in a state, they can't be forced to collect sales tax on sales into that state. Consumers who purchase from out-of-state retailers are generally supposed to pay the state taxes themselves, but few do.
A total of 36 states and the District of Columbia had asked the high court to revisit the issue, which doesn't affect internet giant Amazon.com because it collects state sales tax nationwide. But the case does affect other online retailers including Overstock.com, home goods company Wayfair and electronics retailer Newegg, who are part of the case the Supreme Court accepted.
Large brick-and-mortar retailers like Walmart and Target have long bemoaned the fact that they have to collect sales tax on online purchases because they have physical stores nationwide. Meanwhile, smaller online retailers, who don't have vast networks of stores, don't have to collect the tax where they don't have a physical presence.
States say the court's previous rulings have also hurt them. According to one estimate cited by the states in a brief they filed with the high court, they'll lose out on nearly $34 billion in 2018 if the Supreme Court's previous rulings stand. The Government Accountability Office, which provides nonpartisan reports to Congress, wrote in a report last year that state and local governments would have been able to gain between $8.5 billion and $13 billion in 2017 if they could require out-of-state sellers to collect tax on sales into the state.
The Supreme Court first adopted its physical presence rule on sales tax collection in a case dealing with catalog retailers in 1967, a year that states pointed out in their brief was "two years before the moon landing and decades before" the first online retail transaction. The high court last considered the issue in 1992.
The National Retail Federation, which represents both internet and brick-and-mortar sellers, said Friday it welcomed the Supreme Court's decision to take the case.
"Unfortunately, antiquated sales tax collection rules have resulted in an uneven playing field that's making it harder for Main Street retailers to compete in today's digital economy. This is a basic question about fairness, which all of our members deserve whether they're selling in stores or online," federation president Matthew Shay said in a statement.
Overstock.com said in a statement Friday that it "looks forward to the opportunity to convince the Supreme Court to confirm its prior rulings protecting the free flow of interstate commerce from overreaching state tax laws."
The Supreme Court will probably hear arguments in the case in April.
If the Governor has his way, beer made in South Dakota will flow in much larger quantities as early as this summer.
Gov. Dennis Daugaard proposed easing up some regulations on microbreweries in South Dakota during his State of the State address Jan. 9. He said those laws date back to prohibition and need to be updated.
His proposal would increase yearly caps from 5,000 to 30,000 barrels for the state's licensed microbreweries. Currently, if brewers go over the barrel cap they risk losing the ability to sell beer from the increasingly popular tap rooms at breweries.
A cap of 5,000 barrels (roughly 155,000 gallons) of beer may seem like a lot, but that number is a fraction of the beer cap that neighboring states have. North Dakota, Wyoming and Montana all have barrel caps more than five times as high as South Dakota's current limits and Iowa has no limit at all.
The new legislation would also allow microbreweries to sell directly to retailers, something Daugaard said will help South Dakota businesses compete with those surrounding states.
“The statutes in this area (microbrewing) are a mess, and in many cases, they just don’t make sense,” Daugaard said during his address on Tuesday. “I’ll be supporting several bills this session to streamline and modernize these statutes.”
For microbreweries like Lost Cabin Brewing, the easements come as a welcome relief. Lost Cabin’s co-founder, Jesse Scheitler, said the company is already one fifth of the way to the current 5,000 barrels.
Scheitler said the brewery has only been open for a year and he hopes to keep expanding his business, but the current yearly barrel cap could make that difficult. Scheitler thinks the new limit will modernize South Dakota’s outdated regulations.
“As far as for the state itself, I think beer kind of bridges South Dakota’s two biggest industries … tourism and agriculture,” he said.
Lost Cabin, located on West Omaha Street across from Founders Park, serves ales, lagers and porters to Rapid City residents. Their most popular drinks are their Father in Lager and the Lord Grizzly Scotch Ale. If the bill passes, they’ll be able to sell those brews right to restaurants and grocery stores as soon as this summer.
Daugaard’s chief of staff, Tony Venhuisen, said the regulation changes could take place July 1.
“South Dakota’s laws governing microbreweries are burdensome and out of line with other states and hinder these businesses from growing,” Venhuisen said. “ … The changes will increase the viability of microbreweries and increase their ability to grow.”
For brewers like Scheitler, a larger barrel cap could mean a better community.
“We’re not only manufacturing a product here, but we also actively work in our communities.”
PIERRE | The South Dakota Game, Fish & Parks Commission gambled on the unknown Friday, changing the odds for how hunters are chosen for 36 sets of licenses.
The new approach cubes — or multiplies to the third power — what are known as preference points.
Hunters accumulate preference points when their names aren’t drawn by lottery for a specific license type. People with preference points have a great chance of drawing a license the next year.
The goal of the change is to give a greater statistical advantage to people who have accumulated more preference points. Under the adopted plan a hunter with two points would now get two to the third power preference points or eight.
Hunters sometimes complained after they applied and didn’t get a license, especially those wanting a chance for trophy bucks or bull elk or bighorn sheep.
The new system gives significant weight to hunters who have accumulated points for several years. Take the example of one hunter with a two preference points under the current system. When those points are cubed the result is eight points. But say that hunter had four preference points under the current system. The resulting cubed number would be 64 points.
Commissioners received 440 pages of comments about the proposed change.
On Friday none of the commissioners or any GF&P staff on hand seemed to know how or when South Dakota began preference-point drawings.
“I shouldn’t have asked,” Barry Jensen of White River said. He is commission chairman.
No one admitted keeping score, either, for which side finished ahead in the comments.
The complicated task of explaining the change fell on department official Scott Simpson. He showed commissioners some examples of how odds changed. Each time, the statistics depended on the number of applicants, how many preference points were in play and the number of licenses available.
As for comments, Simpson said many didn’t fit into specific ‘for’ or ‘against’ categories. Jensen agreed. Their impressions were that comments ran stronger for the change. Jensen said that also seemed true from what he’d personally heard.
“More people I talked to were in favor of it than not,” he said.
The commissioners voted five to zero for the plan. Three weren’t there.
“It’s approved,” Jensen declared. He gave a little shrug.
“We’ll see what happens with that, I guess.”
Getting to Trojan today would be difficult — after all, it’s just a hole in the ground, swallowed up by the Wharf Mine.
The only evidence that the town existed at all is some foundations scattered in the nearby woods and the memories of former residents.
In the early 1850s while the California Gold Rush was in full swing, few non-Native Americans had set foot in the Black Hills.
There were whispers and rumors, but no one knew of the considerable quantities of gold the Hills contained. That all changed with Custer’s 1874 expedition to the Black Hills, when his party found gold. Word spread across the nation and prospectors flocked here, hungry for their share.
Near what is present-day Lead, prospectors struck it rich on Bald Mountain in early 1877 and mining claims were quickly made. The town of Trojan and nearby Terry were founded by miners from these claims. Trojan’s prosperity grew, and the population soon followed.
By 1900, the Trojan Mining Company was at work to consolidate the many small mining claims into their company, and by 1911 they had largely succeeded.
As the mines were consolidated, many miners left for Deadwood or Homestake and the population fell. Bald Mountain Mining Company bought out the Trojan Mining Company. The consolidated mines were worked for a couple of decades until they ran dry. By 1959, all mining operations had shut down after millions of dollars of gold and silver had been extracted throughout its history.
Matt Klein of Deadwood grew up in Trojan during its later history as a haven for artists. His parents moved there for the cheap housing and bought their house for only $7000. They were truly living in history, and his father, Greg Klein, even found old telegraphs and letters from the early 1900s detailing mining operations in their attic.
The telegraphs sometimes talked in code. Afterall, they were transporting precious metals so they couldn’t be too cautious.
One telegraph from Dec. 18, 1914 read “bar about nipper nuzzle nimbus nutty faithless,” meaning the bar is about $12,500.
Others expressed worry about how World War I would affect their supply. “Phillips has wired manufacturer regarding effect war will have on supply, delivery and price of cyanide. Will wire you reply. Five months supply assured,” read an undated telegraph to Chicago.
From hole in the sky to hole in the ground
Then in the 1970s, an unlikely group breathed life back into the town: hippies and free-thinkers looking for cheap housing and mountaintop living. Their creative community earned the nickname “hole in the sky.”
A lively community of artists formed with poets, singers, woodcarvers and painters among their ranks. A newspaper article from the late 1970s titled “Small City of Trojan Has Talented Group of Citizens” by Lois Miller described the community.
“Maybe it is the heady exhilarating mountain air or the intoxicating scenery that is partly responsible for so much unusual talent in the little mining community of Trojan. There are more talented persons among the Trojans than you would find in most places several times its population of 153 persons,” Miller wrote.
There was never a dull moment in town and parties were common. A group of Trojans created the tongue-in-cheek “Trojan Country Club” out of one of their homes, where they would host parties and get-togethers. During the winter, it would be common to get vast amounts of snow, so they’d take to the slopes. Usually, they’d be snowed in for at least one week in the year. The warm weather of the summer brought outdoor parties, hiking, volleyball, and playing in the large sand dune nearby.
“People would come from all over to four-wheel in the sand dunes. We’d jump in and be waist deep in sand,” remembers Klein.
The community had a contentedness that Klein remembers as one of his favorite aspects of childhood in Trojan.
“All of us had an endearing fondness for it. It’s hard to emulate a place like that. You felt like you’re connected to the community,” he said.
But the good times couldn’t last forever. Near the turn of the century, Wharf Resources was planning to buy out everyone and expand their mining operations into the ground under their homes.
“We knew the writing on the wall and that Wharf would buy everyone out,” explained Klein. Wharf purchased the property and auctioned off remaining structures. One of the last structures, the Trojan schoolhouse, was finally demolished in 2010. While the loss of his hometown is like an “itch (he) can never scratch,” he is glad that Wharf helped the community, which wouldn’t have happened had they not expanded.
“Not only is my intention to ensure the memory and history of Trojan is never forgotten, but also to convey that the Lead-Deadwood community has prospered in so many ways from the Trojan expansion,” he said, giving examples of Wharf helping local nonprofits.
“Without their Trojan expansion, none of it would have possible,” Klein explained.