Ecommerce giant Amazon.com will collect tax on its South Dakota sales beginning February 1, 2017, Governor Dennis Daugaard announced in his 2017 State of the State Address. The governor called the company’s decision “a big step in the right direction,” but said it “doesn’t solve the sales tax issues for online purchases.”

Last spring, South Dakota enacted economic nexus legislation requiring certain out-of-state businesses lacking a physical presence in the state to collect and remit tax on South Dakota transactions. Senate Bill 106 was a direct challenge to the precedent upheld by Quill Corp. v. North Dakota, the 1992 United States Supreme Court decision holding that a business must have a substantial physical presence in a state in order for the state to impose a tax obligation. The policy was immediately challenged, and the state, in turn, is seeking a declaratory judgment action. A decision in the state’s favor would require abrogation of Quill.

According to the Argus Leader, approximately 200 out-of-state companies doing business in South Dakota should be collecting tax under SB 106. However, only about half of those have opted to comply with the law. Federal law and Quill support the actions of the remaining companies.

Amazon’s decision to voluntarily comply with the South Dakota law is in step with its recent actions in other states. The internet seller began collecting tax in Washington D.C. last October, in Alabama on November 1, 2016, and in Iowa, Louisiana, Nebraska, and Utah as of January 1, 2017. Amazon hasn’t expounded its reasons for doing so: it said simply that it was “required” to collect in Iowa and D.C., and voluntary collection has been referenced in Alabama and Utah. No explanation has been provided for its actions in Louisiana and Nebraska — although Nebraska Tax Commission Tony Fulton said Amazon is “exhibiting responsible corporate citizenship.”

Come February 1, Amazon.com will be collecting tax in 34 states plus the District of Columbia. Tax will not be applied to sales in the following states (although residents need to remit use tax on their taxable purchases): Arkansas, Hawaii, Idaho, Maine, Mississippi, Missouri, New Mexico, Oklahoma, Rhode Island, Vermont, and Wyoming. Alaska, Delaware, Montana, New Hampshire, and Oregon don’t have a general state sales tax.

A number of the states where Amazon doesn’t currently collect, including Oklahoma, Rhode Island, and Vermont, have already adopted some sort of remote sales tax or use tax notification policy. In others, including Tennessee and, most recently, Missouri, lawmakers are considering such legislation. Proponents of online sales tax in many states are hoping a solution will come from either the United States Supreme Court (SCOTUS) or the federal government, which could grant states the right to tax remote sales. Attorneys general from almost a dozen states, including Hawaii and Mississippi, have urged the SCOTUS to reconsider Quill, while the National Conference of State Legislatures has repeatedly pleaded with Congress to come up with a solution.

Amazon is certainly not the only large ecommerce business in play, but it is the largest, and what it does holds sway. As of this writing, however, the full impact of its decision to collect tax in six states in the last four months remains to be seen.

Tax automation software taxes the complexity out of sales tax compliance. Learn more.