SIOUX FALLS, S.D. (KELO) — A possible grocery tax repeal by the South Dakota Legislature and signed into law by Gov. Kristi Noem would have “very significant” impact on municipalities if counties and cities were included in the tax repeal, the city finance director told city council members Tuesday.
City council member Rich Merkouris asked Shawn Pritchett how the city would be impacted if there was a full repeal of the food sales tax. Pritchett responded the impact would be “significant” but with no official legislation he spoke about only possible options.
Pritchett told city council members if the state stopped collecting food sales tax but left cities and counties to decide to keep a 2% or 1% tax, it’d be a change in precedent. He said past attorney general opinions have forced municipalities to form sales tax base to the state and have a mirror image of the state’s property tax base.
Prittchett said the legislation could be written to specifically exclude municipalities, but that would shift the decision to fully repeal the grocery tax down to more local government boards.
Pritchett said if Sioux Falls decided to remove the food sales tax, surrounding communities would be forced to follow even if they were not required. The smaller communities, Pritchett said, would be greatly impacted by losing large, stable revenues.
Pritchett said Sioux Falls has a very diverse tax base.
Pritchett told the city council members many states don’t tax groceries, but he also said many states have income taxes and South Dakota does not have an income tax.
“We have to weigh how we tax in South Dakota,” Pritchett said. “It’s hard to gauge exactly the impact in Sioux Falls if we eliminate the food and grocery tax, but at this point we estimate it’s probably in the $12 to $15 million dollar range.”
In the weeks leading up to the election, Noem came out in support of repealing the grocery sales tax, a measure she had previously opposed both as governor and in the state legislature.
Many lawmakers have said more details, budget impacts and facts would be needed before he or she could support or oppose any food sales tax repeal.