South Dakota Enacts Economic Nexus Legislation

On March 22, 2016, South Dakota Governor Dennis Daugaard signed into law economic nexus legislation. The legislation, effective May 1, 2016, adds sales and use tax collection requirements for remote sellers who meet certain sales thresholdsand makes sales of tangible personal property, products transferred electronically, and services for delivery into South Dakota. It is important to note that virtually everything is taxable in South Dakota including professional services like legal and accounting services.

A retailer would be presumed to be liable for the collection of sales and use tax in South Dakota, even if the seller does not have a physical presence in state, if the seller meets either of the following criteria in the previous or current calendar year:

  • The seller’s gross revenue from the sale of tangible personal property, any product transferred electronically, or services delivered into South Dakota exceeds $100,000; or
  • The seller sold tangible personal property, any product transferred electronically, or services for delivery into South Dakota in 200 or more separate transactions.

In anticipation of a challenge and really following Justice Kennedy’s advice in the Direct Marketing Association decision, the legislation provides an expedited appeals process for any challenges to the constitutionality of the law. The legislation also provides that enforcement of the law will be “stayed by the courts until the constitutionality of this law has been clearly established by a binding judgment, including, for example, a decision from the Supreme Court of the United States abrogating its existing doctrine, or a final judgment applicable to a particular taxpayer.” All remote sellers should evaluate their South Dakota sales activities and determine their position on this new law. (S.B. 106, effective May 1, 2016)

For an update on this news item, click here.

Posted on March 28, 2016