Officials urge crackdown on tax evaders at Sturgis motorcycle rally
STURGIS (AP) — Sturgis city officials are urging the state to crack down on vendors at the annual motorcycle rally who fail to pay taxes on sales.
The rally, which begins Aug. 4, attracts scores of temporary merchants who offers tattoos, T-shirts and other merchandise. City officials say it's easy for vendors, many of whom only accept cash, to intentionally under-report their sales or not collect and submit the required tax.
"This has been an ongoing concern of the city, depending on who you talk to, for probably more than 20 years," said Daniel Ainslie, Sturgis city manager.
All vendors who operate during the rally are required to get a license with the state and pay 5.5 percent of their total revenue in state tourism and sales taxes. Temporary merchants within the city limits are required to get a similar license with the city and pay a 2 percent tax on their total sales revenue, the Rapid City Journal reported.
The city has urged the South Dakota Department of Revenue to increase tax enforcement during the rally. Ainslie said the state had shown mixed interest increasing the number of spot-checks and audits its employees do on temporary vendors.
"I think there was probably a little concern, but I would not say that the state was as interested or saw it as large of a concern as we did," he said.
Doug Schinkel, director of business tax for the state Department of Revenue, said that his office takes tax enforcement during the rally seriously, but is also realistic about collecting 100 percent of owed tax.
"We are dealing with transient vendors and cash businesses," he said. "So a lot of cash is changing hands out there. There's no amount of enforcement that's to going to ensure honesty among all the taxpayers out there."
Schinkel said his department should have more than 30 employees handling licensing and enforcement during the rally. While the number of workers is similar to last year, he said the department had broader authority to grant overtime compared to previous years.
"While we didn't increase the number of individuals out there, we are increasing the number of hours they are working," he said.
Sturgis collected $240,084 in tax revenue from about 700 temporary vendors at last year's rally. The state collected $178,126 from its 1.5 percent tourism tax and $480,169 from its 4 percent sales tax from temporary vendors who operated both in Sturgis's city limits and across the Black Hills.
Bryan Carter, co-owner of The Knuckle Saloon, a popular bar in downtown Sturgis that also sells merchandise, said he believed the majority of temporary vendors played by the rules.
"I think the majority of the vendors are doing it the right way," he said. "There's always a few who aren't, no matter what you do."