This holiday season shoppers are spending more of their dollars online than ever before, which has prompted some states to remind taxpayers of their potential use tax obligations. When internet vendors don’t collect tax on sales of taxable goods and services, consumers owe the state the corresponding use tax.
Record-breaking sales …
Internet sales made history on Cyber Monday 2017. Adobe Insights measures online shopping data and projected online sales reached $6.59 billion for the day — topping the impressive $5.03 billion spent online on Black Friday. By comparison, internet sales in 2016 totaled $3.39 billion on Cyber Monday and $3.34 billion on Black Friday.
Consumers even shopped online on Thanksgiving, once devoted only to friends, family, feasting, and football. And shopping continues this month all the way up to the big day: In select locations, items ordered from Amazon on Dec. 24 will reach their recipients by Christmas morning, if not Christmas Eve.
All told, Adobe Insights expects online sales will surpass $100 billion this holiday season.
… equal record-breaking tax revenue
South Dakota wants to be sure to capture all the tax revenue it’s owed from online sales delivered into the state. To that end, the South Dakota Department of Revenue has issued this reminder to taxpayers: “State and municipal use taxes may be due on … online purchases.”
The department doesn’t presume intentional sidestepping of use tax. It admits, “Many consumers do not realize that several internet retailers are not collecting sales tax on online sales and that use tax would be due in these instances.” It therefore urges South Dakotans to “check their online transactions to see if the tax is owed.”
Approximately $50 million in use tax is not reported each year. To learn more about reporting use tax in South Dakota, see the Department of Revenue.
South Dakota leads effort to tax remote sales
Even after the holidays, South Dakota will try to capture as much tax revenue as possible from remote sales. Currently it’s working to overturn the physical presence precedent that prohibits states from taxing out-of-state sellers. In fact, its remote seller compliance law was created specifically to challenge that precedent, upheld in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). The state is currently waiting to hear if the Supreme Court of the United States will take the case and reconsider Quill. Learn more.