On the heels of a recent Supreme Court decision that will allow states to charge online retailers sales tax, South Dakota sales tax may actually be on the way down.
The recent Supreme Court decision will allow states to charge sales tax to online retailers. While this may make online shopping more expensive, South Dakota sales tax might be going down.
In South Dakota, lawmakers in 2016 boosted the state’s sales tax rate from 4% to 4.5%. However, the state required that the increase would be scaled back if the state could ever collect from online retailers which operate out of state.
Well, now they can.
With the recent Supreme Court decision, state residents can expect a one-tenth percent rate cut per $20 million in new state revenue from purchases through online retailers.
South Dakota has estimated it loses about $50 million annually to e-commerce. However, the Supreme Court may have just leveled the playing field somewhat. There is fear, however, that this will lead to higher costs associated with online shopping.
Still, the decision is not without its supporters who believe it provides a more equitable tax environment for online and offline retailers. It remains to be seen what the long-term effects are.
Sales tax varies from state to state. South Dakota benefits from one of the lower ones in the country at 4.5%. It would not be surprising to see other states pass legislation similar to South Dakota’s in order to ease the added burden from online sales tax.
It’s All About Location
Even with the Supreme Court’s decision, sales tax will continue to vary based on location. States have the power to levy sales tax, but city’s also may add additional tax. Few people are basing where they live on the local sales tax, however it does contribute to cost of living.
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