Many remote sellers and marketplace providers must soon get a South Dakota sales tax license and pay sales tax. South Dakota enacted two economic nexus laws in response to the U.S. Supreme Court’s decision in Wayfair.
Remote Seller and Marketplace Provider Compliance Requirements
Remote sellers and marketplace providers that meet the annual economic nexus threshold must:
- register for a South Dakota sales tax license; and
- collect and remit South Dakota sales tax.
Economic Nexus Threshold
The economic nexus threshold is:
- $100,000 or more in annual sales into South Dakota; or
- 200 or more annual transactions into South Dakota.
To determine the total amount of sales or the number of transactions into South Dakota, taxpayers should include the sale of:
- tangible personal property;
- products transferred electronically; and services.
Effective Dates for Economic Nexus Enforcement
The effective dates are different for remote sellers and marketplace providers.
Remote Sellers’ Effective Date
Remote sellers meeting the threshold must comply by November 1, 2018.
The Wayfair litigants are not subject to the November 1, 2018, deadline. The court will determine their collection effective date in their court proceedings.
Marketplace Providers’ Effective Date
Marketplace providers meeting the threshold must comply by March 1, 2019.
How Do I Apply for a South Dakota Sales Tax License?
What is a Remote Seller and a Marketplace Provider?
The Department of Revenue has provided definitions and examples of remote sellers and marketplace providers.
A remote seller is a business without physical presence in South Dakota.
There are three different types of marketplaces. But, only two are subject to South Dakota’s economic nexus laws. The three types of marketplaces are:
- fulfillment service;
- virtual classified ads.
Fulfillment service companies are subject to the economic nexus laws. A fulfillment service connects the seller to buyers and handles all aspects of the transactions, such as:
- warehousing; and
An example of a fulfillment service is Fulfillment by Amazon.
Facilitators are subject to the economic nexus laws. Facilitators connect sellers to buyers and only processes the orders and payments. The actual seller is usually responsible for the shipping.
Examples of facilitators are eBay and Etsy.
Virtual Classified Ads
Virtual classified ad companies are not subject to the economic nexus laws. A virtual classified ad business:
- advertises goods and services for sale;
- connects sellers to buyers; and
- has no other involvement in the transaction.
An example of a virtual classified ad company is Craigslist.
South Dakota v. Wayfair Inc. Decision
In South Dakota v. Wayfair Inc., U.S. Supreme Court, Dkt. 17-494, June 21, 2018 (TAXDAY, 2018/06/22, S.1), the U.S. Supreme Court held that physical presence is no longer required to establish sales and use tax nexus.
S.B. 1 and S.B. 2, Laws 2018, effective September 12, 2018, and applicable as noted above; Release, South Dakota Department of Revenue, September 13, 2018