Politics & Government

SC customers now are paying millions of dollars more to shop online

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The percentage varies depending on the county in which you live

The state is raking in millions more in tax dollars from online shoppers in South Carolina after forcing online retailers to charge sales tax.

South Carolina pocketed about $40 million in added sales tax revenue from South Carolinians since November, not long after the U.S. Supreme Court decided in June 2018 that states could slap its sales tax onto online retailers without a physical presence in the state.

In May alone, Palmetto State online shoppers helped to generate about $3.5 million that will flow into state coffers.

Those millions in sales tax dollars were collected from 3,089 newly licensed businesses in the state added to the books since the new ruling applied Nov. 1, according to the S.C. Department of Revenue. It’s unclear which companies generated the most tax revenue for the state. The state’s tax agency declined to say who the top three retailers were, citing a disclosure requirement in the law.

But the list of out-of-state retailers now charging — at minimum — the state’s 6% sales tax include: 800-Flowers, a flower and gift company; Azazie, an online bridal shop; and skin care and cosmetic company AHAVA North America Inc.

State officials are hailing the change as great news.

“The Supreme Court decision is a monumental ruling, giving states the ability to tax remote sellers based on economic nexus,” the state’s revenue director Hartley Powell said by email. “This decision changed a decades-old standard, from one requiring a physical presence in the state to now only requiring an economic connection.”

The high court’s 5-4 ruling last summer reversed the Supreme Court’s 1992 decision that critics said harmed small business owners.

Now, those critics say, the court has leveled the playing field, requiring out-of-state retailers — for example home goods store Wayfair.com or Overstock.com and outdoor retailer L.L. Bean — to collect sales tax if they conduct at least $100,000 in gross sales on at least 200 transactions in the state they sell in. The decision followed a case between the state of South Dakota and online retailers.

Before the ruling, South Carolina collected sales tax on 22 of the top 25 e-retailers, including Target, which has stores across the state.

The state’s lead economist told The State the new money will eventually be included in the state’s budget for lawmakers to spend. The money could pay for higher pay raises for teachers, some lawmakers say.

State economists project the court’s decision will generate about $74 million or more in annual sales tax revenue.

“I would not expect it (the money) to decrease,” said Frank Rainwater, the director of the state’s Revenue and Fiscal Affairs Office. “The trend is people are buying more online. I would not, short of a significant change in the economy, expect that (money) to decrease.”

And if lawmakers’ hopes prevail, a new wave of millions will pour into the Palmetto State this summer.

In April, Gov. Henry McMaster signed into law legislation that sought to clarify to retailers — particularly mega retailer Amazon which has warehouses in South Carolina — that retailers are required to collect sales tax on third-party vendors that have S.C. customers.

The law did not create a new tax, said the bill’s primary sponsor state Sen. Marlon Kimpson, D-Charleston, who added South Carolinians were always supposed to self-report the tax on their yearly filings, though many do not, he added.

“Initially, they (Amazon) didn’t have to (collect sales tax) because we exempted them from doing so as an incentive,” said Kimpson, who added that incentive expired in 2016, and subsequently the state filed a complaint against Amazon, arguing by not collecting the sales tax, the state was losing out on millions.

A judge in S.C. Administrative Law Court has yet to issue a ruling on the matter.

“It’s an unfairness argument, as well as a fiscal responsibility argument,” Kimpson added.

The Associated Press contributed to this report.

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Maayan Schechter (My-yahn Schek-ter) covers the S.C. State House and politics for The State. She grew up in Atlanta, Ga. and graduated from the University of North Carolina-Asheville. She has previously worked at the Aiken Standard and the Greenville News.
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