2017, the State of South Dakota passed a law with the intent to collect
South Dakota sales tax on any taxable item purchased outside the state
if the buyer takes possession of the purchased item within the border of
South Dakota, i.e., has the item shipped. This includes items purchased
in person at brick-and-mortar stores or auctions, as well as online at
sites like Amazon.com, Wayfair.com, or online auctions. This law has
been challenged, and the U.S. Supreme Court chose to hear arguments.
business must have a physical presence in a state for that state to
require said business to collect sales tax. This is based on a ruling by
the Supreme Court in Quill Corp. v. North Dakota.
How does this affect you and the auction industry?
companies currently have auctions with buyers from out of state. If it
stands, auction companies that do business in South Dakota would be
tasked with the enormous burden of determining the applicable sales tax,
collecting it, and remitting it to the buyer’s local taxing
jurisdiction. In March 2014, there were 9,998 tax jurisdictions. (See the above graphic.)
Each time you sold an item to a buyer located in a different state, you’d need to determine the applicable sales tax, collect, and then remit the tax to the buyer’s local taxing jurisdiction. To do so, you will be required to hold a sales tax license in each state in which buyers purchase items from you, and in most cases a corresponding business license. By doing so, you will be subject to that jurisdiction's regulations and police powers.
More importantly, this case has many eyes on it. In fact, 25 other states have similar pending legislation. And, 35 states filed a brief in this case in support of South Dakota.