North Dakota will be ready to collect taxes from online retailers should federal law changes be made.
South Dakota is asking the U.S. Supreme Court to review whether retailers can be required to collect sales taxes in states where they lack a physical presence, according to the Associated Press. Thirty-five state attorneys general, including North Dakota’s, and the District of Columbia this week signed on to support South Dakota's legal bid.
“The big thing for me personally is big items,” said Jeff Hinz, who owns Ace Hardware in Bismarck.
Hinz said often customers will threaten to buy large items, such as snow blowers, online if he doesn’t agree to offer a discount.
But retailers without a physical presence in the state have a price advantage over brick and mortar businesses of up to 8.5 percent, according to Sen. Heidi Heitkamp, D-N.D., who also joined a number of lawmakers in urging the court to consider the issue and who has introduced a number of bills trying to change the law legislatively.
“When these retailers can charge lower prices, our small businesses and jobs are at risk,” Heitkamp and the other lawmakers wrote.
According to the state’s most recent study, the North Dakota Tax Commissioner’s office estimates $25 million to $30 million was not collected in 2012 because online retailers were not required to collect. Online purchases since 2012 have increased by as much as 50 percent, so North Dakota Retail Association President Mike Rud estimates more recent losses at $30 million to $40 million.
Hinz said it doesn’t seem fair because online retailers still use North Dakota’s roads to ship their items but they don’t help cover the tax burden associated with maintaining them.
“UPS, the postal service and Fedex are their brick and mortar,” Hinz said.
And even though online retail giant Amazon collect sales tax for the items it sells, third-party vendors that use the site to sell are not required to do so by the company.
“The point is just for a level playing field for all our retailers,” Rud said. “We don’t care about competing with them, but we don’t want to have such a big disadvantage.”
Rud said during the latest legislative session, North Dakota, as well as about 15 other states, passed a law that will allow the state tax department to immediately force sales tax collections from online retailers once a court decision or national law is passed.
Rud called the state law critical, “because now we’re ready as soon as the case is heard by the Supreme Court.”
“This is a pretty serious issue and everyone is becoming quite aware something needs to be done here,” said Rud, adding they are hoping for a decision or a law change within the next year.