A settlement agreement has been reached in the state’s internet sales tax collection—or remote seller– law.
The “State of South Dakota v. Wayfair, Overstock and Newegg” agreement removes the injunction that prevented the state from requiring the defendants to comply with the remote seller law. Under the terms of the settlement, Wayfair, Overstock and Newegg will comply with the law beginning Jan. 1, 2019. The State also reached a settlement in a related lawsuit that had been on hold until the South Dakota v. Wayfair case had been decided. The parties have agreed to dismiss the related case.
In 2016, the South Dakota State Legislature passed Senate Bill 106, which required out-of-state retailers to collect and remit sales tax similar to in-state retailers. The law applies to out-of-state retailers if they have more than $100,000 in sales or complete more than 200 transactions per year within South Dakota. The controlling precedent of “Quill Corporation v. North Dakota” had required a retailer to have a “physical presence” within a state before it could be obligated to collect and remit that state’s sales taxes on purchases delivered into the state. On June 21, 2018, the United States Supreme Court overruled the physical presence requirement.
In September 2018, Gov. Dennis Daugaard convened a special session of the Legislature to consider bills addressing the implementation of the sales tax collection. Gov. Daugaard signed into law a measure which removed the imposition of an injunction against collection of sales tax on remote sales, except in regard to the Wayfair litigants. This bill, which goes in effect tomorrow (Nov. 1, 2018), will allow the State of South Dakota to enforce sales tax collections from those who meet the $100,000 in sales or 200 transaction thresholds. A second bill created a new sales tax license for online marketplaces.
The Wayfair settlement agreement and dismissals from both cases await final approval by the State Circuit Court.
For more information on South Dakota’s remote seller law, visit http://sd.gov/remoteseller.
