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Internet Sales Tax Fairness - Procurement Approach

Two states -- North Carolina and South Dakota -- have enacted laws that require the state to purchase goods and services only from companies that collect sales tax on all sales in the state. This is an option that may be available to local governments, as well.

Below is South Dakota's law, passed in 2003.

For more information on internet sales taxes, see North Carolina and Internet Sales Tax Fairness. For more information on purchasing preferences, see rules on Local Purchasing Preferences and an explanation of these rules in Ask Dr. Dave.

        ENTITLED, An Act to  restrict public corporations from making purchases from any retailer that fails to collect and remit sales and use taxes.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
     Section  1.  That chapter 5-18 be amended by adding thereto a NEW SECTION to read as follows:
     No public corporation may purchase any goods or services from any retailer that meets the definition of a retailer or a retailer maintaining a place of business in the state, pursuant to subdivisions 10-46-1(8) and (9), if the retailer or any affiliate of the retailer fails or refuses to collect and remit the sales and use tax on any sale delivered by any means to a location within this state. The Department of Revenue shall provide a list to public corporations of any retailer that fails to collect and remit the sales and use tax. For the purposes of this section, the term, affiliate, is any person who directly or indirectly owns or controls, is owned or controlled by, or is under common ownership or control with, another person. No public corporation is liable for the breach of any duty required of the public corporation by the provisions of this Act if the breach, error, act, or omission is made in good faith. The provisions of this Act do not apply to any emergency purchase made pursuant to § 5- 18-3.1, or to any purchase made pursuant to § 5-18-18.1, 5-18-18.2, or 5-18-9.4, or to any contract for the construction of a new building or the remodeling or addition to an existing building or a contract for any other public improvement which involves the expenditure of twenty-five thousand dollars or more made pursuant to § 5-18-3

More:

• State By State Breakdown of Projected State and Local Revenue Losses (PDF)
• Closing three common corporate income tax loopholes could raise additional revenue for many states, from the Center on Budget and Policy Priorities