A South Carolina senator says he wants to make things more fair for South Carolina’s brick and mortar businesses by taxing online purchases at the same rate as store-bought items. State revenue officials say the proposed legislation will have minimal impact on sales tax collections.
S.C. Sen. Marlon Kimpson, D-Charleston, calls it a matter of fairness in a bill he sponsored that's making its way through the Legislature's upper chamber.
"Based on the mixed success experienced in other states to similar enacted click-through legislation, we do not anticipate that South Carolina will realize any appreciable increase in sales and use tax revenue from the enactment of this bill in fiscal year 2017-18," the state Revenue and Fiscal Affairs Office said in its economic impact statement on the proposed legislation.
The state group also says the bill will only generate revenue if Congress passes a law allowing states to collect sales tax on out-of-state retailers.
Kimpson believes the state is losing millions of dollars in uncollected sales tax revenue as more purchases are made tax-free online each year, putting brick-and-mortar stores at a disadvantage.
Under the pending legislation, out-of-state retailers would be deemed to have a presence in South Carolina, subjecting them to the tax because of marketing partnerships with websites or blogs that provide "click-through" advertising.
The bill would apply only if an out-of-state retailer's gross proceeds from the in-state referral agreements exceed $10,000 during the previous year.
Some large retailers in other states that have adopted similar measures terminated their affiliate referral programs, lessening the expected revenue stream, according to the state Revenue and Fiscal Affairs Office.
Retailers with a physical presence in South Carolina already are supposed to tax online purchases by residents and businesses in the state. But state officials say voluntary compliance by residents to remit the sales tax on online purchases to the state is low.
Online giant Amazon began collecting sales taxes on consumer purchases in South Carolina in 2016 after a 4½-year tax break given by lawmakers when it established a distribution center in the state in 2011.
Kimpson sponsored similar legislation two years ago, but it died in the House because he said it was considered too late in the session.
Kimpson's current bill, which moved quickly through committee hearings since being reintroduced earlier this year, was set for its final reading in the Senate Feb. 2, but it was put on hold after a handful of senators objected.
If the bill becomes law, it would take effect next Jan. 1.