PIERRE, S.D. (KELO) — The Legislature’s Executive Board decided Tuesday more data must be obtained in the next few weeks about how much revenue the state treasury gained by taxing more of the sales that remote sellers and third-party marketplaces have made to South Dakota customers.
Lawmakers want Legislative Research Council staff to provide the information when the panel next meets December 3. That’s the same day Governor Kristi Noem delivers recommendations for state government’s next budget to a joint gathering of legislators in the House of Representatives chamber.
The board discussed the draft of an LRC issue memorandum Tuesday on what’s become known as the ‘Partridge amendment.’ It was attached to the 2016 legislation that raised the state sales and use tax rate to 4.5 percent. The rate had been four percent since 1969.
The amendment, made by now-Senator Jeff Partridge, a Rapid City Republican, called for the half-percent tax increase to be gradually repealed in $20 million increments, when certain conditions were met under a separate piece of legislation that was also moving through.
That second measure, sponsored by then-Senator Deb Peters, a Hartford Republican, sought to apply the state sales and use tax to goods and services that South Dakota customers purchased from businesses that didn’t have a physical presence in South Dakota.
The U.S. Supreme Court had ruled in its 1992 Quill decision that businesses needed a physical presence in a state to be subject to sales tax. The nation’s high court however in 2018 overturned that precedent with the Wayfair decision that South Dakota state government put before it using Peters’ bill.
South Dakota Department of Revenue officials have maintained they can’t yet determine how much more revenue has come into the state treasury as a direct result. The Legislature tried but couldn’t clarify the Partridge amendment in the 2019 session.
The Legislature’s Executive Board assigned the topic to the LRC staff. Code counsel Wenzel Cummings and senior fiscal and program analyst Jeff Mehlhaff delivered the memo Tuesday. Mehlhaff said a projected amount for calendar 2019 appeared to be more than $21 million.
State economist Mark Quasney from the Noem administration’s Bureau of Finance and Management listened to the presentation from the back row of the committee room. Quasney shook his head “no” when other testimony was invited.
Quasney and Mehlhaff later went together into the hall and talked.
Code counsel Cummings opened the presentation of the Partridge issue memo Tuesday with this statement: “We can all probably agree on one thing. The language of the statute is unclear.” Cummings added that neither he nor Mehlhaff worked for the Legislative Research Council in 2016.
Representative Spencer Gosch, a Glenham Republican, said overall general-fund revenue should be trigger the reduction rather than online revenue.
Senator Brock Greenfield, a Clark Republican, predicted “a huge, huge debate ahead of us” in the 2020 session. Greenfield said some legislators don’t understand what’s at stake. “Storefronts are closing up. We’re losing a lot of Main Streets, in a lot of towns of different sizes,” he said.
Representative Steven Haugaard, a Sioux Falls Republican and the board’s chairman, said the 2016 tax increase “was obviously a very contested bill and it passed by a hair.” He added, regarding the Partridge rollback, “I’m not sure we’re going to ever be able to tie anything to an exact dollar amount.”
Greenfield asked Cummings and Mehlhaff to continue working on the issue and to work with budget officials from the Noem administration to “shed some light on the issue.”
Greenfield told them to come up with “the best possible and most illuminating” answers available. Their draft memo is on hold until the board meets December 3.