South Dakota cities to lose millions in internet service tax

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RAPID CITY, S.D. (AP) – Rapid City is expected to lose more than $2 million in state funding over the next two years following the congressional repeal of South Dakota’s tax on internet service.

The 2016 Permanent Internet Tax Freedom Act, which required South Dakota to stop taxing internet services by mid-2020, is projected to lead to a $700,000 loss in state funding next year and $1.4 million the following year for Rapid City. The South Dakota Municipal League estimates that it will result in a total revenue dip of $7 to $10 million for all of the state’s municipalities by 2021.

The tax applies to retailers that conduct more than $100,000 worth of business in South Dakota annually or more than 200 transactions a year. The tax is expected to phase out in South Dakota by June of 2020.

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