Even towns of less than 300 need a 2% sales tax

KELOLAND.com Original
KELO Sales Tax South Dakota Map

SIOUX FALLS, S.D. (KELO) — A 2% sales tax will allow two towns with a combined population of less than 500 to prepare for the future.

It’s conceivable someone may want to establish a medical marijuana business in the town of Lane in Jerauld County.

“We don’t want to miss out on any sales tax,” said Loree Gaikowski, the town’s finance director. “Where does the (tax) go (if) Lane gets a dispensary?”

Gaikowski said a medical marijuana business is possibility for the town with 45 to 50 people. There is existing activity to which a sales tax can already be applied, she said.

“Last year we started the Leap to Lane,” Gaikowski said.

The event features a variety of vendors who set up to sell items in the old Lane school gym.

The town can collect sales tax from vendor sales at that event, she said.

The state of South Dakota relies heavily on sales tax and municipal tax revenue. The tax revenue will make up 63.5% of the revenue for the state budget.

Without a sales tax in Lane, the town misses out. The town will start a 2% tax on Jan. 1.

Henry will increase its share of sales tax revenue by increasing the existing tax from 1% to 2%.

“We have 270 people but we’re continuing to grow,” said town finance director Shelley Fuller. “In the last few years we’ve had two or three new homes with more people moving into our community.”

A wooden sign made for the town of Henry in Codington County. Photo from the town of Henry Facebook page.

Henry, like Lane, is not a city, but a town. The two towns have a town board with a town board president or chairman instead of a mayor or council.

Henry town board president Dorene Foster said the town board system functions a lot like a mayor and council system.

The tax increases in the two town needed approval from the town board. There was also a period to allow businesses and individuals to provide input on the proposed increase.

Lane is in Jerauld County. Wessington Springs in that county has a 2% sales tax.

Henry is in Codington County. Watertown and Kranzburg have a 2% sales tax in that county.

Sales tax is collected for online sales. Henry had $296 in online sales tax due in October. Another small town, Hecla, had $313 due.

Sales tax, but not for big business

Neither of the towns expect to make a lot of money from the sales tax changes.

The town board president Shirley Hines owns the cafe in Lane. Her cafe and a repair shop are the two main businesses in town.

“We (aren’t) gonna make much from us,” Hines said of the 2% sales tax revenue. Still, it seems like it will be a good thing for the town, she said.

Although she doesn’t do much online ordering of items herself, Hines said the tax will impact those who do shop online.

Henry has a few businesses such as a steakhouse, bar and grill and convenience story. Fuller and her husband operate a lawn care businesses in town.

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“We will pay that additional percentage as well,” Fuller said of her business. “My position as a business owner is that this will bring additional revenue that will help us do work and projects down the line.”

“There’s not a lot of business so it’s not going to generate a lot of revenue,” Foster said. But any additional amount will help, she said.

In October, Henry had $223,874.75 in taxable sales, according to the South Dakota Department of Revenue. The town had $245,235.50 in October 2020.

Comparatively, Watertown had $75,398,728.84 and $66,827,534.92 in the same time periods.

Henry had $2,898,052.52 in taxable sales in calendar year 2020, according to the S.D. DOR.

Maintenance work

Foster said the one penny tax has served the town of Henry well. The town is one of the last in the state, she thought, to increase to 2%.

Towns like Lane and Henry may not be large but they still have needs. Streets need to be maintained and snow needs to be plowed.

“The town has a maintainer. We hire someone to run and clear the streets,” Hines said of Lane.

Lane has gravel streets and one paved street that runs through town. “We try to keep that paved,” Hines said.

“We have to gravel the streets once in a while,” Hines said of maintaining them.

Henry recently hired a part-time maintenance person. The sales tax revenue will be used to pay for that position.

“We felt we needed a maintenance person. He’s been very busy,” Foster said.

Like Lane, it has streets to maintain.

The town has a road fund and park and recreation fund, for example, Foster said.

The town’s sewer budget was spent in full for a recently extended a sewer line to the town’s lagoon system, Foster said.

“We had to carry some over from the general fund,” Foster said.

“Infrastructure projects are not cheap,” Foster said. The town sets aside money for such projects but it may also be likely to borrow from the general fund, she said.

Fuller said Henry has its own school and its 15 miles from Watertown. Both help make it attractive to potential residents and businesses.

The town has seen an increase in residents but not in additional businesses yet, she said. Still, it needs to prepare for additional future growth which could cause a need for more street and other projects, Fuller said.

“We’ve got to look to the future,” Fuller said. “Little Henry is growing and little Henry needs more (revenue).”

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