Sales Tax Hike - Ballot Issue
July 29, 2011
A proposal to increase South Dakota's sales tax to 5 percent from the current rate of 4 percent maybe on the general election ballot in 2012. A one percent increase in the state sales tax would generate an estimated $166 million to $175 million per year.

A group called Moving South Dakota Forward is seeking the increase. Their plan calls for splitting the additional revenue between K-12 education and Medicaid services. The group is a coalition of public schools and health care providers.

The State of South Dakota has faced a major budget crunch, resulting in an average 10% cut in spending across the board in 2011. The cuts impacted every aspect of state government, including education and Medicaid.

As required by state law 12-13-25, Moving South Dakota Forward provided a draft version of their ballot initiative to the South Dakota Legislative Research Council for review and comments, and LRC made a few small changes to the draft. Once the group has formed a ballot question committee, they will file the final version of the initiated measure with the Attorney General's office. Under state law 12-13-25.1, the Attorney General is required to write an objective, clear and simple explanation of the measure's purpose and effect before petitions can be circulated.

Click here to read the draft version of the petition, and the Legislative Research Council's comments.

For information regarding other proposals that voters may consider in 2012, visit the South Dakota Secretary of State's website.

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Sales Tax Review Committee
July, 2011
The first meeting of the Sales Tax Review Committee was July 12 at the State Capitol building in Pierre.  (Committee documents are available below).

Led by Committee Chairman Rep. Charles Turbiville (R-Deadwood) and Vice Chair Sen. Larry Tidemann (R-Brookings), the committee is tasked with reviewing South Dakota’s sales tax exemptions. Many of the exemptions the committee will be reviewing directly impact South Dakota’s retailers, including tax exemptions on:

• advertising
• commercial fertilizer sold in quantities of 500 pounds or more, for agricultural use
• displays - revenue received by a retailer pursuant to written contract requiring display of product or signs in specified location
• parts or repairs on ag equipment (note: this exemption was part of an agreement negotiated when sales tax on ag equipment went from 3% to 4%)
• lodging or campsites provided to a person for 28 or more consecutive days. Occasional rental  of sleeping accommodations or camp sites for 10 or less days per year
• lawn care chemicals purchased by lawn/garden services (note: the actual lawn service is already taxed when billed to the end customer)
• lease of a motor vehicle for more than 28 days (now subject to 3% excise tax)
• boats over 12 feet in length (now subject to 3% excise tax)
• mini storage
• sales of coin, currency or bullion
• reimbursable expenses: attorney/accountant, auctions, funeral services

If all tax exemptions were repealed, it would generate approximately $528.1 million per year, according to South Dakota Department of Revenue figures. However, there were many tax exemptions that the committee decided NOT to study, including tax exemptions on interest, bad check fees, credit card processing fees, membership dues, bags and sacks, and others of particular importance to retailers.

For a more complete list of exemptions and information regarding the amount of tax that would be generated by taxing those items, see the link to the "List of sales/use tax exemptions" below. The list was developed by the South Dakota Department of Revenue.

Along with Rep. Turbiville and Sen. Tidemann, other members of the Sales Tax Review Committee include Senators Tom Hansen, Jim Hundstad, Tom Nelson, Al Novstrup, Jim Putnam, and Bruce Rampelberg, and Representatives Kristin Conzet, Bernie Hunhoff, Tom Jones, Kim Vanneman, Mike Verchio, Mark Willadsen, and Dean Wink.