Bill Would Collect Sales Tax for Online Purchases in SC

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COLUMBIA, S.C. (WSPA)—South Carolina would start collecting the state sales tax on all online purchases under a bill expected to come up for a vote in the state Senate next week. Now, the state collects the sales tax only on online sales for companies that have some kind of physical presence in the state.

For example, if you buy something from Walmart online, the company charges you the state sales tax, since it has stores in the state. But if you buy something from a company like L.L. Bean, which has no stores or offices in the state, it does not charge you a sales tax.

Under this bill, sponsored by Sen. Marlon Kimpson, D-Charleston, all companies would start collecting the sales tax.  “This is not a new tax,” he says. “Our tax code already calls for users and purchasers to self-report this tax when they tender the appropriate return to the South Carolina Department of Revenue in April. Many, many of our citizens fail to report what is due to the Department of Revenue, and so this is a tool that allows the state to recoup dollars already legally owed.”

But even if the state were to pass this law, it couldn’t start collecting the sales tax from everyone because the federal government allows states to collect it only from companies that have a presence in those states.

Sen. Kimpson says besides collecting money that’s already owed, this would also help state businesses.

“As more and more consumers shop on the internet, our mom-and-pop and brick-and-mortar stores, which employ South Carolinians and contribute to our economy, are at a competitive disadvantage, because, while people may go in their stores to try on the various products and seek counsel from the various store employees, they go outside in the parking lot and order it on the internet where they don’t have to pay sales tax. So this is about leveling the playing field for stores that employ our citizens and contribute to our economy,” he says.

A fiscal impact analysis of the bill says it could potentially bring in $440.3 million a year, but the state would likely actually collect $346.2 million. All that would depend, of course, on the federal government passing a law requiring online retailers to collect it.

The bill passed on second reading in the state Senate at the end of January by a vote of 38 to 5. It needs a third and final reading, which could come as early as Tuesday. If it passes then, it would go to the state House of Representatives.

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