An attempt to trigger a process to reduce the half-cent sales tax increase implemented last year was defeated by a legislative committee on Tuesday (2/7).
HB 1131 called for the reduction of the state’s sales tax by one-tenth percent – from 4.5 percent to 4 percent – for each additional $20 million increment of net revenue collected and remitted by online sellers.
The impetus for the bill stems from an amendment added to last year’s House Bill 1182, which added the half-cent increase to the state’s sales tax with revenue dedicated to improving teacher salaries.
The voluntary collection and remission of sales tax currently being pursued by Amazon and other Internet sellers to South Dakota is not triggering the sales tax reduction process.
“I don’t see (voluntary remission) as a windfall…to the state,” S.D. BFM Deputy Director Jim Terwilliger said. “I see this as supporting our tax base to where it should be.”
Indeed, concern about the revenue coming into South Dakota to support the state’s budget has been addressed already. Through six months of the fiscal calendar the state has ongoing receipts coming in $23.8 million under the adopted budget.
Terwilliger noted “that rate reduction a tenth of a percent is about a $23 million loss in terms of the sales tax” and HB 1131 would set the trigger off.
“That can create some funding difficulties,” Terwilliger said.
Supporters of the bill took a straight line approach to the trigger being set as the voluntary collection and remission could add up to $20 million, which would reduce the sales tax by a tenth of a percent.
“You either support the statute or you oppose the statute,” Rep. Drew Dennert said.
However, last year’s clause in HB 1182 differs from this year’s HB 1131 concept in that the trigger would only be introduced if federal action – either legal or through Congress – called for online sellers to collect and remit sales tax to the states.
“We don’t know if those funds are there,” ASBSD Executive Director Wade Pogany testified in opposition of the bill.
Rep. Kyle Schoenfish added there’s no clause stating if revenue were to dip below what the half-cent increase added then a tenth of a cent would not be added back to ensure the commitment to funding teacher salaries is met.
“Maybe the statute needs to be looked at to bring more consistency in the future,” Rep. Schoenfish said.
Pogany asked committee members to “keep the commitment we have” in place now for schools and teachers.
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