South Dakota Use Tax Notice Bill Signed; DMA Strongly Opposes

March 14, 2011 — Governor Dennis Daugaard (R) has signed SB 146, a bill requiring out-of-state marketers to notify consumers that they may owe taxes to South Dakota on their purchases and SB 147, a bill that redefines “controlled group of corporations” for the purposes of requiring sales tax collection. SB 146 is essentially a copy of the rules adopted by the Oklahoma Tax Commission last year to implement the use tax notice law there.

The new South Dakota law requires that marketers who do not collect South Dakota sales tax must notify the consumer on the invoice, on a catalog order form page or on the check out page of a website that South Dakota sales tax has not been collected, that South Dakota requires the consumer to remit any taxes owed to the state and that more information may be found on the South Dakota Department of Revenue webpage.

Members should note that SB 146 explicitly removes any penalties associated with noncompliance -- Section 9 states that “no criminal penalty or civil liability may be applied or assessed for failure to comply with the provisions of this Act.”

SB 147 says that, for sales tax nexus purposes only, certain independent corporation structures would now provide nexus for the purposes of obligating sales tax collection. The intent is to target companies that have subsidiaries, warehouses, distributions houses or “similar places of business” that either sell “substantially similar” products or operate under “the same or a substantially similar business name.”

DMA strongly opposed both of these bills throughout the legislative process and Jerry Cerasale, SVP for Government Affairs, testified against the bills before the South Dakota House Taxation Committee when it took them up in February. DMA also lobbied the governor for a veto.

Please contact Ron Barnes (rbarnes@the-dma.org) or Jerry Cerasale (jcerasale@the-dma.org ) for more information.

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About Direct Marketing Association (DMA)

The Direct Marketing Association (www.the-dma.org) is the leading global trade association of businesses and nonprofit organizations using and supporting multichannel direct marketing tools and techniques. DMA advocates standards for responsible marketing, promotes relevance as the key to reaching consumers with desirable offers, and provides cutting-edge research, education, and networking opportunities to improve results throughout the end-to-end direct marketing process. Founded in 1917, DMA today represents companies from dozens of vertical industries in the US and 48 other nations, including nearly half of the Fortune 100 companies, as well as nonprofit organizations.

In 2010, marketers – commercial and nonprofit – spent $153.3 billion on direct marketing, which accounted for 54.2% of all ad expenditures in the United States. Measured against total US sales, these advertising expenditures generated approximately $1.798 trillion in incremental sales. In 2010, direct marketing accounted for 8.3% of total US gross domestic product. Also in 2010, there were 1.4 million direct marketing employees in the US. Their collective sales efforts directly supported 8.4 million other jobs, accounting for a total of 9.8 million US jobs.

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