Why sales tax critical to budget

KELOLAND.com Original

SIOUX FALLS, S.D. (KELO) — Although sales revenue did increase through October for Fiscal Year 2020, it’s not enough to sustain the South Dakota Fiscal Year 2020 budget, which ends on June 30, 2020.

Net sales and use tax increased by 4.1% to $387,216,396 through October for Fiscal Year 2020, according to the South Dakota Bureau of Finance and Management.  Governor Kristi Noem and the Legislature planned for a 4.9% increase.

That’s a big cause of concern for Noem and the Legislature because sales and use tax account for 63% of the fiscal year 2020 budget.

Noem said on Tuesday she and the Legislature will need to adjust their expectations for sale and use tax from the planned 4.9% increase to 4.5%

The recommended revision means the state would expect $3,609,085 less in state sales and use revenue. The projected revenue was $1,075,218,900 and the revised revenue would be $1,071,609,815.

Ongoing receipts were $3.7 million lower than projected for the first four months of fiscal year 2020, according to the Bureau of Finance and Management.

The state has a history of sales and use tax revenue increases over the past several years.

The highest increase since 2015 was recorded in fiscal year 2017 at 10.29%.

The increase was 1.6% in fiscal year 2015. It was 2.91% in fiscal year 2016.

Then Governor Dennis Daugaard noted a slower pace in growth in fiscal year 2018 and for fiscal year 2019.

“My FY2019 budget recommendations reflect the most recent revenue conditions. State tax collections are below the adopted estimates in the current year. Lower revenue collections will require adjustments in the current budget, and allow for only modest increases in the FY2019 budget,” Daugaard wrote in his letter to the Legislature on the Department of Finance and Management website.

Noem also cited lower than expected online revenue in her Dec. 3 address.

The state Department of Revenue shows reported remote vendor (online) sales to the state of $6,957,553 for October, which is $1,385,831 more than the $5,571,722 reported in October 2018.

In October, Revenue Secretary Jim Terwilliger said revenue from online sales taxes were not keeping pace with expectations, an Oct. 23 story by KELOLAND’s Capitol News Bureau Reporter Bob Mercer said.

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