PIERRE, S.D. (KELO) — A proposal to double the $2 maximum room-occupancy tax that municipalities can allow remains alive in South Dakota’s Legislature.
The House Taxation Committee voted 7-5 on Tuesday to send HB-1109 to the full House for consideration. That could come as early as Wednesday afternoon.
The legislation would allow a municipality the choice of letting a lodging business charge up to $4 per occupied room or charge a special 4% tax instead.
“This is a bill that allows local control,” the bill’s sponsor, Republican Rep. Becky Drury, told the House committee. She said the $2 maximum hasn’t changed since 2005. “This is permissive language.”
The higher fee and the new tax however likely require a two-thirds majority of 47 for House passage. Should it reach the Senate, the lead sponsor there is Republican Sen. Tim Reed.
Derek Johnson, state economist in the governor’s Bureau of Finance and Management, told the House committee that the $4 “far exceeds” the rate of inflation for that period. He said the CPI went up 54% and described the 4% tax option as a “staggering” increase.
“I’m not sure how much company I have on this side of the bill,” Johnson said.
He was the only person to testify against it — until some of the legislators on the committee gave their views.
“The question is, who’s going to be paying this tax?” Republican Rep. Phil Jensen said. He noted that people already are paying higher prices for groceries. “And we want to burden them with another tax? I don’t think so.”
Democrat Rep. Peri Pourier said people driving distances to cities for medical treatment would have to pay the higher tax if they stayed overnight. She spoke from her experience of paying double for a Rapid City room than she paid in Puerto Rico on vacation.
“I’m just saying some people work really hard for what they have,” Pourier said.
But Republican Rep. Roger DeGroot said the dozen supporters’ testimonies were compelling. “It is local control,” DeGroot said. “And what hasn’t been raised since 2005? It’s amazing it was this long to take a look at it.”
Sioux Falls allows the tax to be charged only by establishments with at least 40 rooms, according to Republican Rep. Greg Jamison, so there are places that people can stay without paying the tax.
Jamison said communities in other states compete against South Dakota by subsidizing their bids for national events. He pointed out that the business community faces the challenge of convincing city officials that the tax will help. “That need is going to have to be proven.”