Official Newspaper of Eddy County since 1883
Official Newspaper of Eddy County since 1883
The above graphs created by Ashley Schuster illustrate how the total taxable sales and purchases have varied locally and statewide over the past 10 years. The data was taken from North Dakota Sales and Use Tax Statistical Reports prepared by the N.D. Tax Commissioner's Office. All the reports are online at nd.gov/tax.
Sales tax, a tax on sales or on the receipts from sales made within a defined area, is one of the primary sources of revenue for state and local governments. It is also one of the most talked about taxes recently, not only locally but also nationally.
Locally, the City of New Rockford began collecting sales tax in 1996. Then, in 2008, the city commission passed a resolution to double the city sales tax from 1 percent to 2 percent. Since then, then city's taxable sales and purchases have trended upward, and the city has collected anywhere from $180,000 to $220,000 each year in sales tax revenue.
In looking at the graphs below, one can see that the city has realized a dip in taxable sales and purchases over the past few years after increasing by 50 percent from 2007 to 2012.
This is similar to what the state of North Dakota has experienced over the past 10 years, although the state saw an extended jump in sales from 2012 to 2014 before totals dipped back down in 2015 and 2016.
As has been reported for the past year or more, the New Rockford City Commission is planning to complete a major sewer and water infrastructure upgrade. The cost of the project is estimated at $7 million.
The city has applied for funds from USDA Rural Development in order to make the project more affordable for taxpayers. The city is eligible to receive up to 40 percent of the project cost in grants through the program, though it is unknown how much USDA will award to New Rockford, if any.
Once the city receives its letter of award, public meetings will be held before the city makes a final decision on if and how to proceed with the project.
Sales tax is one of three primary ways local governments currently pay for infrastructure projects. The other two are user fees (water and sewer bill increases) and special assessments, which are assessed on property owners in the city.
The city commission has not yet developed a funding formula for the project, but they did allocate $1 million in reserve funds to be used for the improvements.
New Rockford's sales tax is allocated as follows, per city ordinance: general fund, 15 percent; infrastructure improvement fund, 32 percent; economic development, 32 percent; New Rockford Park District, 17 percent; fire department equipment and building fund, 4 percent.
Officials expect to see the city's taxable sales and purchases increase with the addition of Casey's General Store and Dollar General. Casey's held its grand opening last week, and Dollar General is slated to open this spring.
Eddy County's only other incorporated city, Sheyenne, does not collect sales tax. The city recently completed a major infrastructure project there, similar to the one proposed for New Rockford.
After applying to USDA and receiving a 40 percent grant, the council opted to fund the balance through special assessments. Each parcel in the city limits was assessed a flat amount to be paid by its owner over the next 30 years. The Sheyenne City Council will hold its public hearing on the assessments Monday, February 5.
Sales tax collection has also been a big topic among lawmakers across the country recently, especially in rural states like North Dakota, South Dakota and Wyoming. The focus of the conversation has been on remote, or e-commerce sellers, who currently are not required to collect and remit sales tax to states.
North Dakota was at the center of a major decision made by the Supreme Court in 1992 (Quill Corp. v. North Dakota). In that case, the court ruled in favor of mail-order giant Quill Corp., stating that a company must have a physical presence in a state in order for the state to collect tax on its sales. Ever since, companies conducting business online have had an advantage over local businesses because, lawmakers say, residents can purchase goods for less online without the burden of paying sales tax.
To challenge the physical presence precedent upheld by Quill, South Dakota created an economic nexus law in 2016. The law requires out-of-state sellers making at least 200 sales of taxable goods or services in South Dakota or making more than $100,000 from sales of the same in the state to collect and remit South Dakota sales and use tax. Wyoming passed a nearly identical law last year, assessing a 5 percent sales tax to any business who conducts at least 200 transactions or makes more than $100,000 in remote sales to Wyoming residents.
South Dakota's law was immediately challenged in Wayfair, Inc. v. South Dakota, and the case has been making its way through the court system ever since. On Friday, January 12, the Supreme Court agreed to hear Wayfair, Inc. v. South Dakota, setting up a potential reverse of the Quill decision.
U.S Senator Heidi Heitkamp, who was the Attorney General that represented North Dakota in the Quill case, was pleased that the high court agreed to revisit the matter. She issued a statement after the announcement, saying, "When I first brought this case to the Supreme Court in 1992, catalog retailers had an unfair advantage over brick-and-mortar retailers because they weren't required to collect sales tax. Since then – with the explosion of online retail – the problem has only gotten worse, and North Dakota's small businesses are hurting as a result. The Supreme Court's decision to heed my call and revisit this case is welcome news for the small businesses that create jobs and are the lifeblood of our communities. It will also add up to $35 million in critical online sales tax revenue for our state."
In November, Heitkamp was among a bipartisan group of senators who submitted an amicus brief to the U.S. Supreme Court urging the Court to reconsider and overturn the 25 year-old case.
U.S. Senator Mike Enzi of Wyoming was another of the senators. He said, "I applaud the Supreme Court for its choice to review (the Quill decision), which has put brick-and-mortar retailers at an unfair disadvantage compared to online and out-of-state competitors who don't have to collect sale and use taxes," Enzi said. "Since that time, we have also seen state and local governments deprived of tens of billions of dollars over the years. I hope Congress will take this opportunity to act on a bipartisan, bicameral basis to remedy the situation for states and towns and level the playing field for local businesses."
The Supreme Court is expected to rule in the case by late June.
