Blue Nile has announced that they will no longer ship to South Dakota, due to a new law that requires online retailers to collect sales tax for merchandise shipped to South Dakota. A spokesman for Blue Nile said “Unfortunately, South Dakota’s law is in direct contradiction to federal law and we made the difficult decision to temporarily suspend shipping to South Dakota until this unconstitutional law can be addressed.” In the case of Quill Corp. v. North Dakota, the Supreme Court ruled in 1992, that internet retailers are not required to collect sales tax for states where they do not maintain a physical presence.
A physical presence is defined as something like a store, office or warehouse. Apparently this is not something which concerns the legislation of South Dakota. The first paragraph of the summary states “The State acknowledges that a declaration in its favor will require abrogation of the United States Supreme Court’s decision in Quill Corp. v. North Dakota.”
Having operated a successful online venture since 1996, I can tell you that the concept of collecting and reporting sales tax, individually for every state in the union, is a logistical and bookkeeping nightmare. One which would likely catapult Cyber Space as we know it, into a deep, dark, black hole.
Personally, I applaud the decision of Blue Nile to stop shipping to South Dakota. The state stands in direct opposition to a decision which was handed down by the highest court in the land. If it wants to legally collect sales tax for merchandise purchased online, then its legislators should work to change the law on a federal level.
A better approach might be a national sales tax, in lieu of federal income tax. But of course, we all know how that will play out… We’ll end up paying national sales tax, on top of the federal and state taxes that we’re already paying. Support Blue Nile.
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