South Dakota Imposes Notification Requirements on Out of State Companies!

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On March 11, 2011, the Governor of South Dakota followed in Colorado's and Oklahoma's footsteps by signing legislation (SB 146) imposing notice requirements for retailers that DO NOT HAVE NEXUS in South Dakota which are selling tangible personal property, services, or products transferred electronically for use in South Dakota.

De Minimis Retailers Exempt

According to the legislation, "de minimis retailers" are exempt from the notice requirements.  A "de minimis retailer" is any noncollecting retailer that made total gross sales in South Dakota in the prior calendar year of less than one hundred thousand dollars and reasonably expects South Dakota sales in the current calendar year will be less than one hundred thousand dollars;

What is a "Noncollecting Retailer"?

A "noncollecting retailer" is any retailer, not currently registered to collect and remit South Dakota sales and use tax, who makes sales of tangible personal property, services, and products transferred electronically from a place of business outside of South Dakota to be shipped to South Dakota for use, storage, or consumption and who is not required to collect South Dakota sales or use taxes;

"South Dakota Purchaser"A "South Dakota purchaser" is any purchaser that purchases tangible personal property, services, or products transferred electronically to be shipped or transferred to South Dakota.
 
Notice Requirements
 
According to the legislation, each noncollecting retailer shall give notice that South Dakota use tax is due on nonexempt purchases of tangible personal property, services, or products transferred electronically and shall be paid by the South Dakota purchaser. The notice shall be readily visible and contain the information as follows:

  1. The noncollecting retailer is not required, and does not collect South Dakota sales or use tax;
  2. The purchase is subject to state use tax unless it is specifically exempt from taxation;
  3. The purchase is not exempt merely because the purchase is made over the Internet, by catalog, or by other remote means;
  4. The state requires each South Dakota purchaser to report any purchase that was not taxed and pay tax on the purchase. The tax may be reported and paid on the South Dakota use tax form; and
  5. The use tax form and corresponding instructions are available on the South Dakota Department of Revenue and Regulation website.

Notice On A Website

The notice requirement on a website shall occur on a page necessary to facilitate the applicable transaction. The notice shall be sufficient if the noncollecting retailer provides a prominent linking notice that reads as follows: "See important South Dakota sales and use tax information regarding the tax you may owe directly to the state of South Dakota." The prominent linking notice shall direct the purchaser to the principal notice information required.

Notice in a Catalog

The notice requirement in a catalog shall be part of the order form. The notice shall be sufficient if the noncollecting retailer provides a prominent reference to a supplemental page that reads as follows: "See important South Dakota sales and use tax information regarding the tax you may owe directly to the state of South Dakota on page __." The notice on the order form shall direct the purchaser to the page that includes the principal notice required.

For any catalog or phone purchases, the complete notice shall be placed on the purchase order, bill, receipt, sales slip, order form, or packing statement.

Notice on Internet Purchases

For any internet purchase, the invoice notice shall occur on the electronic order confirmation. The notice shall be sufficient if the noncollecting retailer provides a prominent linking notice that reads as follows: "See important South Dakota sales and use tax information regarding the tax you may owe directly to the state of South Dakota." The invoice notice link shall direct the purchaser to the principal notice required.

If the noncollecting retailer does not issue an electronic order confirmation, the complete notice shall be placed on the purchase order, bill, receipt, sales slip, order form, or packing statement.

For any internet purchases, notice on the check-out page fulfills both the website and invoice notice requirements simultaneously, the notice shall be sufficient if the noncollecting retailer provides a prominent linking notice that reads as follows: "See important South Dakota sales and use tax information regarding the tax you may owe directly to the state of South Dakota." The check-out page notice link shall direct the purchaser to the principal notice required.

Combining Notice Requirements with Other States Requirements

If a retailer is required to provide a similar notice for another state in addition to South Dakota, the retailer may provide a consolidated notice so long as the notice includes the information required by South Dakota, specifically references South Dakota, and meets the placement requirements.

Summary

These notice requirements take effect July 1, 2011.  Note:  Colorado's notification requirements are currently "on-hold" due to a preliminary injunction.  Yet, that didn't stop South Dakota from passing this legislation.  Hmmmm???

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