Tourism tax revenue fell, then climbed, in pandemic

This story has been updated with comments from Jim Terwilliger.

PIERRE, S.D. (KELO) — Visitor spending in South Dakota dropped during the first year of the COVID-19 pandemic but then rebounded.

That’s according to taxable-sales data from the state Department of Revenue.

South Dakota charges an additional 1.5% tax on gross receipts of certain visitor-related businesses.

Those businesses report their taxable sales to the department.

The department’s reports show taxable sales subject to the tourism tax totaled more than $861 million in fiscal 2018 and nearly $893.9 million in fiscal 2019. (State government’s fiscal year runs July 1-June 30.)

Then came the pandemic. The spread of COVID-19 across the United States in early 2020 caused travel to fall. South Dakota was no exception. Taxable sales subject to the tourism tax dropped to $833.6 million for fiscal 2020, down $60 million.

Visitors didn’t stay home-bound for long. South Dakota benefited from the urge to get out. Taxable sales subject to the 1.5% tax bounced back up for fiscal 2021, reaching $862.4 million.

Then came the boom. Spending on activities covered by the tourism tax rocketed to $1.143 billion for fiscal 2022.

Sales during the first 10 months of fiscal 2023 suggest that another record is possible. Taxable sales through April had already reached $1.052 billion.

How much does the state treasury gain from the tax? More than $12.9 million was due in fiscal 2018. That had climbed to more than $17.1 million in fiscal 2022.

The money goes to state government’s tourism promotion fund.

KELOLAND News contacted state Finance Commissioner Jim Terwilliger for his perspective. He said fiscal 2022 was “a record year for the tourism tax” with collections up almost 50% from the previous year.

“Collections so far in fiscal year 2023 are trending very close to the record fiscal year 2022 figures. Travel South Dakota expects another strong year of tourism spending even in uncertain economic conditions,” Terwilliger said.

Hotels and motels have been the top-grossing category subject to the tax.

There were 13 counties in fiscal 2018 where hotel and motel businesses reported more than $5 million of taxable sales. The tourism tax due is in parentheses.

Pennington $125,478,978.67 ($1,882,186.08)

Minnehaha $87,094,358.45 ($1,306,415.51)

Lawrence $52,797,158.68 ($791,958.09)

Custer $23,519,668.50 ($352,795.54)

Brown $15,656,355.08 ($234,845.46)

Davison $14,448,505.40 ($216,727.68)

Brookings $10,726,604.80 (160,899.10)

Hughes $9,256,310.37 ($138,844.72)

Codington $8,982,629.80 ($134,739.52)

Yankton $7,699,221.50 ($115,488.31)

Lincoln $6,909,736.34 ($103,646.10)

Lyman $6,104,007.04 ($91,560.24)