Shopping online is something that just about everybody does.
Paying sales taxes on those online purchases is something that hardly anybody does.
South Dakota retailers who sell their wares out of brick-and-mortar shops – and who by law must collect sales tax from their customers -- want to level the playing field for online businesses. They are working hard to convince Congress to do exactly that.
Nothing is more important to the retail community in South Dakota than for Congress to close this loophole and pass e-fairness legislation, according to the South Dakota Retailers Association.
We agree and we support the retailers association, and all our local businesses, in that effort.
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Internet purchases that go untaxed are costing the state of South Dakota an estimated $39 million a year in uncollected sales tax. That not only hurts state tax coffers, but it gives online retailers an unfair price advantage.
The Marketplace Equity Act legislation is a good start in addressing the inequity. It would give states the legal authority necessary to require the collection of sales taxes by Internet businesses that don't have a physical presence in the point-of-sale state. The South Dakota Legislature has done all it can to streamline and support online sales tax collection, and now Congress must act. State Sen. Bruce Rampelberg said the current situation is unfair to South Dakotans who shop in their own communities and pay sales tax on their purchases. "…we think there's an inherent unfairness when people aren't paying what is legally owed to the state," Rampelberg said.
We agree that it is especially unfair when Internet-based retailers essentially use state tax monies to compete with a business owner who must pay to keep the lights on in a store. On average, there is 6 or 7 percent difference in price built in to the profit margin when an Internet company doesn't collect sales tax. Competition for customers is healthy and good, but not when one business is using money that rightly belongs to the taxpayer to gain a pricing advantage.
Collecting sales tax on Internet purchases is not a new tax. It is simply enforcing an across-the-board collection of a tax that already exists. Sales tax collection is part of the cost of doing business in this state. It should be the same cost for all retailers.