As part of his “Agenda for South Carolina’s working families,” Democratic Senator Marlon Kimpson of South Carolina has introduced Senate Bill 870, legislation that would hold certain remote retailers liable for South Carolina sales tax.
Sen. Kimpson did not pull this idea out of a hat. Rather, he is working toward implementing “a recommendation from the state’s Tax Realignment Commission (TRAC).” According to the freshman senator, “South Carolina is missing out on millions of dollars each year in needed revenue that is owed to the state for needed education and infrastructure investments.”
The bill, which has been referred to the Committee on Finance, seeks to:
“amend the code of laws of South Carolina… so as to provide that a retailer is presumed to be liable for the sales tax or responsible for collecting and remitting the use tax if the retailer enters into an agreement with a resident of this state under which the resident, for a consideration, refers potential customers, whether by an internet link or otherwise, to require such retailers to obtain a retail license and remit sales and use tax on all taxable retail sales, and to provide exceptions.”
If it passes, online retailers who sell into South Carolina will be required to collect and remit South Carolina sales tax, provided “the retailer’s gross proceeds of sales attributable to purchasers in this State who were referred to the retailer pursuant to such agreements in the aggregate exceed ten thousand dollars in the preceding twelve calendar months” (Emphasis mine).
“This is not a tax increase.”
Like other proponents of remote sales tax, Senator Kimpson reminds that the tax he proposes is not a new tax or a tax increase. It is, he said, “A plan to better enforce current law in this modern age where e-commerce is becoming the primary method of shopping for some.”
South Carolina Policy Council (SCPC), a think tank dedicated to “limited government, free enterprise, and individual liberty and responsibility,” placed SB 870 on its list of Top Ten Bills to Watch. It highlights this provision in SB 870:
“The provisions of this section do not apply to a retailer that owns, leases, or utilizes a distribution facility in this State for which the provisions of Section 12-36-2691 apply.”
In other words, says SCPC, the law does not apply to Amazon.com or “any other future companies the state’s elected officials choose to exempt from the law in order to attract their business.”
The Amazon provision
Section 12-36-2691 does pertain to Amazon.com, if not by name then by circumstance. It states that owning or leasing a distribution facility in South Carolina “is not considered in determining whether the person has a physical presence in South Carolina sufficient to establish nexus with South Carolina for sales and use tax purposes.” In other words, a physical presence is not sufficient to determine a physical presence.
The sales tax requirement will be waived until January 1, 2016, for a company that:
- “Places a distribution facility in service after December 31, 2010, and before January 1, 2013;
- Makes, or causes to be made through a third party, a capital investment of at least one hundred twenty-five million dollars after December 31, 2010, and before December 31, 2013;
- Creates at least two thousand full-time jobs and with a comprehensive health plan for those employees, after December 31, 2010, and before December 31, 2013; and
- After meeting the requirements [of the above bullet point], maintains at least one thousand five hundred full-time jobs and with a comprehensive health plan for those employees until January 1, 2016.”
Amazon.com, the largest online retailer in the world, has met the requirements outlined in Section 12-36-2691. The company is scheduled to begin collecting sales tax in South Carolina on January 1, 2016.
Who would have to collect?
Just who would have to collect under SB 870? How much business do you do in South Carolina?