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SC hauls in $47M in online sales tax collections after Supreme Court ruling

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A new South Carolina law that took effect in April clarifies who must pay sales taxes on purchases, including online vendors such as retail giant Amazon. File/Associated Press

South Carolina's sales tax collection coffers are now about $47 million fatter thanks to online companies.

That's because remote sellers, or companies that don't have a physical presence but do business in the Palmetto State, have been required for nearly a year to collect sales and remit taxes on the products they sell to South Carolina customers.

The state collected $46.8 million in extra revenue from 3,089 registered remote sellers from Nov. 1 through June, according to Bonnie Swingle, spokeswoman for the state Department of Revenue.

July's sales tax collections have not been reported yet.

"That money is on top of our regular collections," she said.

Regular collections during that same period ballooned by nearly $89 million, a trend of increasing revenues in recent years fed by the state's booming economy with record-low unemployment.

About $25 million of the extra $47 million from remote sellers will go into the state's general fund while the rest will support other state operations and go to counties or municipalities that charge extra sales taxes.

The not-so-small windfall is the result of a U.S. Supreme Court decision in June of last year that reversed a long-standing ruling from 1992 allowing companies not to collect sales taxes if they didn't have a physical presence in a state.

The state's new policy began Nov. 1 to benefit from shoppers across South Carolina and elsewhere who have increasingly turned to their computers to look for items that promise lower prices and shop-at-home convenience, especially since many online purveyors didn't require sales taxes under the nearly 30-year-old Supreme Court ruling.

The policy requires any business that delivers more than $100,000 in goods and services to South Carolina customers to be licensed. The registration fee is $50.

Earlier this year, South Carolina lawmakers went one step further after last year's high court decision. They spelled out that all retailers online and in storefronts must pay sales taxes on their transactions in a new law signed in late April by Gov. Henry McMaster.

The new legislation, called the "Marketplace Facilitator Act," aims to level the playing field between brick-and-mortar stores and internet businesses. It also clarifies and reinforces sales tax collection requirements for anyone who facilitates retail sales.

"With the changing economy and ever-expanding role of the internet in the retail market, the longstanding requirement in the sales and use tax law that a retailer remit the tax on retail sales of tangible personal property owned by another person must apply to all retailers, including both internet retailers and brick-and-mortar retailers," according to the law.

Just as an on-the-ground store can sell products from multiple entities and must collect sales taxes so must an online shop selling products from different providers, according to the law. It also applies to marketplaces such as a catalog, website, television or radio broadcast.

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Anyone who collects or processes payments from a purchaser, either directly or indirectly through an arrangement with a third party is considered a "marketplace facilitator" responsible for remitting sales taxes to the state.

The new law "provides helpful clarification and modernization of South Carolina's Sales and Use Tax laws as they related to online retail sales and e-commerce," said Hartley Powell, director of the state Department of Revenue. "It ensures that all online retailers collect and remit sales and use tax on all sales, just like brick-and-mortar stores."

Last year's Supreme Court decision and the state's new legislation are welcome news to small retailers such as outdoor gear merchant Half-Moon Outfitters.

"That should only help to level the playing field and could only boost our prospects," said Beezer Molten, CEO of the North Charleston-based chain of eight stores across South Carolina and Georgia.

"It underpins the things that are important in our mainstream and pedestrian retail shopping districts," he said. "They do need to be protected from unfair taxation."

He's also noticed a change over the past 24 months in the move of specialty vendors away from online retail juggernaut Amazon, saying they lose control over pricing and promotional efforts.

"When they sell direct, they have power over their own brand," he said. "On Amazon, they lose control over how it's marketed."

He doesn't know how much of that has trickled down to other retailers, but he said his business is having a better year this year and he has a more optimistic outlook because of the new law and specialty vendors moving away from Amazon.

South Carolina’s tax-collection agency has had the authority to collect taxes from out-of-state sellers since 1990.

But the agency couldn’t flex that power because of the 1992 Supreme Court decision.

Last year's legal decision changed that, and the new state law reinforces it.

Marketplaces, be they in-store or online, must collect 6 percent to 9 percent in sales taxes on customers’ purchases, depending on where the shoppers live in South Carolina. Most counties add at least one extra penny on the dollar to sales. Sales taxes are highest in Charleston and Jasper counties, as well as the city of Myrtle Beach. 

Companies determined not to be in compliance with the new law will face late payment and filing penalties.

Reach Warren L. Wise at 843-937-5524. Follow him on Twitter @warrenlancewise.

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