SIOUX FALLS, S.D. — The state of South Dakota is hoping to quickly lose a case against three internet companies.
The state Supreme Court has set oral arguments for later this month in the state’s lawsuit against the internet retailers in its bid to force the companies to pay sales taxes, the Argus Leader reported .
A loss would allow the state to appeal to the U.S. Supreme Court, which could be heard by the court in its next session if the state ruling is quick enough.
The South Dakota Legislature passed an act in 2016 requiring internet companies that sell $100,000 or more of merchandise in the state, or that make 200 or more transactions, to remit sales taxes to the state.
The act clashes with a 1992 federal ruling that says internet companies don’t have to collect and remit state sales taxes if they don’t have a physical presence in the state. That ruling came before the internet boom.
South Dakota relies heavily on sales tax, so the boom in online sales meant lower tax revenues. The state argued in its brief that it loses as much as $50 million a year in online purchases, which is a figure internet companies dispute.
A basis of the 1992 decision was that it would be burdensome for out-of-state companies to keep track of various state and local sales taxes. But the state is arguing that modern software has solved that problem. It also brings up whether a company has a “presence” when a consumer has access to its online store.
Internet companies have argued that South Dakota overstates how it can be to monitor and adjust sales tax rates. They said there are currently more than 12,000 taxing entities in the country.
“South Dakota’s sales tax regime contributes to the overall complexity of the United States tax system,” said a brief from the companies. “South Dakota has 142 city, county and special district taxes in addition to the state sales tax.”
The state Supreme Court will hear arguments on Aug. 29.
Information from: Argus Leader, http://www.argusleader.com