South Carolina Online Sales Tax Bill Stalls in Senate

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By Andrew M. Ballard

A bill ( S. 214) that would require certain out-of-state retailers to collect state sales taxes is on hold in the South Carolina Senate, after it initially passed with significant support.

S. 214 was approved by the Senate on second reading Jan. 31 by a vote of 38-5. However, before the bill could be sent to the House, state Sen. Wes Climer (R), one of the dissenting votes, objected to a third reading and final vote, placing its future consideration on hold.

Climer told Bloomberg BNA Feb. 2 that he wanted more time to consider the measure and its potential fiscal impact. He said the legislation “had negligible debate on the floor” and fiscal estimates that has been provided vary from $0 to $349 million.

With this bill, South Carolina is part of a surge of interest among lawmakers in capturing lost revenue from untaxed remote sales. So far, bills related to sales tax on transactions by remote sellers have been introduced in at least 25 states, including Hawaii Georgia, Minnesota, Nebraska, South Carolina, Tennessee, Utah and Wyoming.

Approval Likely

“I don’t have grave concerns” about the bill and “am broadly sympathetic” with retailers on the issue, Climer told Bloomberg BNA. “I probably will release it next week” after taking more time to review the legislation, he said.

Regardless of how he decides to vote, Climer said “it’s going to pass anyway” and will be sent to the House.

Under the pending legislation, out-of-state sellers would be deemed to have a presence in the state, making them subject to tax, because of marketing partnerships with websites or blogs that provide “click-through” advertising. The state Senate approved such a nexus bill two years ago, but the House failed to pass the measure.

The obligation to collect sales and use taxes under S. 214 would apply only if an out-of-state retailer’s gross proceeds from the in-state referral agreements exceed $10,000 during the previous year. If enacted, its provisions would take effect Jan. 1, 2018.

Modest Revenue

According to fiscal notes accompanying the measure, when similar “click-through” legislation passed other states, most large internet retailers terminated their affiliate referral programs. That response also is likely in South Carolina, the state Revenue and Fiscal Affairs office said, so additional revenue is likely to be modest.

Among the states that have enacted such nexus provisions are neighboring Georgia and North Carolina. Amazon.com Inc. began collecting sales taxes for South Carolina last year, and now collects in all but six states that have a sales tax: Arkansas, Hawaii, Idaho, Maine, New Mexico and Oklahoma.

Other Bills

The Senate recently approved and sent to the House S. 58, legislation that would provide incentives for cargo shipping in the port at Charleston, and S. 250, a bill that would update the state’s adoption of federal Internal Revenue Code provisions.

To contact the reporter on this story: Andrew M. Ballard in Raleigh, N.C., at aballard@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of S.214, South Carolina's remove retailer tax bill, is at http://src.bna.com/lA7Text of S.58, the port tax credit legislation is at http://src.bna.com/lUmText of S.250, the IRC reference measure is at http://src.bna.com/lUo

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