PIERRE – On Dec. 11, 2015, the U.S. House voted 256 to 158 to approve the conference report of a trade act. It also repealed state and local taxes on Internet access.
One of the ayes came from Rep. Kristi Noem.
Then on Feb. 11, 2016, the U.S. Senate voted 75-20 for it. Sen. John Thune was an aye, while Sen. Mike Rounds was a no.
The access taxes appear on consumers’ cable and cell-phone bills. The repeal was section 922 of the measure President Barack Obama signed into law.
Seven states still charge some version of the tax. The repeal takes effect June 30, 2020.
When Tony Venhuizen, chief of staff for Gov. Dennis Daugaard, met last month with the Legislature’s Joint Committee on Appropriations, he said the repeal would mean a net loss of $12 million to $15 million for South Dakota’s state government.
For local and tribal governments, the net loss would be $7 million to $10 million, Venhuizen said. Those estimates were based on fiscal 2017 revenues.
South Dakota’s three members of Congress are Republicans. Rounds spent two terms as governor before Daugaard, also a Republican. Noem won her party’s nomination for governor and faces state Senate Democratic leader Billie Sutton on Nov. 6.
Noem sponsored federal legislation to let states tax goods and services from remote sellers. She couldn’t get it to the House floor, but the U.S. Supreme Court ruled in South Dakota’s favor in June on the Wayfair case.
Both matters came down to fairness for Noem: Out-of-state Internet vendors shouldn’t get a sales-tax advantage over Main Street businesses and consumers shouldn’t have to pay taxes to access the Internet.
“Broadband access is necessary if we’re going to hire locally, but do business globally. I don’t support taxing the link between South Dakota and the world,” Noem said.
Thune was on the House-Senate conference committee. A spokesman said he “fought hard” to provide South Dakota with a four-year grandfather period.
Said Thune, “I led the Senate’s effort in 2016 to adopt the bipartisan Internet Tax Freedom Forever Act, which will provide permanent tax relief to South Dakota families and businesses who currently pay the government for simply accessing the internet.
He added, “Not only is this a big win for consumers, but it will incentivize entrepreneurs who use the Internet as a tool to innovate and connect more people around the country and world. Keeping Internet access tax-free is critical to the future of next-generation connectivity.”
Rounds told other senators at the time of the vote he actually supported repealing the access tax but wanted it coupled to letting states tax remote sellers.
“There is simply no evidence to suggest that either measure would pass as standalone legislation,” Rounds said. “But together, sound tax policy would move.”
That’s why he voted no.
The loss of access revenue is one more wrinkle as lawmakers hold a special session Sept. 12 at the request of Gov. Daugaard to deal with the aftermath of the Wayfair decision.