When South Dakota lawmakers passed a bill earlier this year authorizing the state to collect sales taxes on out-of-state Internet purchases, they knew they would likely get sued.
That came to pass on Friday.
The American Catalog Mailers Association and NetChoice filed a lawsuit Friday in the state’s Sixth Circuit alleging the sales tax law is unconstitutional. The state was going to begin requiring out-of-state businesses to collect sales taxes starting May 1 on purchases made in South Dakota.
“South Dakota has imposed unconstitutional and unworkable burdens on remote sellers," said Steve DelBianco, executive director of NetChoice, in a statement announcing the lawsuit. “Left unchecked, this misguided tax law could set the course for enormous tax and administrative burdens on businesses across the country. Irresponsible state laws are not the way to make new national policies for interstate commerce.”
In fact, state officials welcome the opportunity to take the issue to court. Part of the law that the Legislature passed included a reference to the U.S. Supreme Court re-addressing the issue of whether states can collect sales taxes on out-of-state businesses. The law passed with overwhelming support – only two lawmakers in the House voted against it – and it was signed by Gov. Dennis Daugaard on March 22.