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Greenhouse operators seek tax exemption enjoyed by farmers

PIERRE -- In a nearly empty hearing room, a legislator squared off against a tax collector Friday.

The legislator, Sen. Tim Begalka, R-Clear Lake, makes his living as a greenhouse operator growing plants.

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He isn't running for re-election this year. Before his time ends in the Senate, he is trying to get a tax definition changed for all of the people in the same business as he is.

Begalka's legislation, SB 160, would grant an agriculture designation for tax purposes to the production of sod and the production of food-bearing and ornamental plants by a greenhouse or nursery.

That would mean a sales-tax exemption on pesticides, fertilizers and fuel used in production.

This isn't a new fight in the Legislature. Governors come and go, while the greenhouse growers keep trying to get the same classification as traditional farmers.

Begalka said Friday the exemptions might save him $100 a year. He said the taxes and the weather put South Dakota greenhouses at a competitive disadvantage with other states in the region such as Minnesota.

He told the Senate Taxation Committee that his statewide estimate of the tax exemptions' impact is $50,000.

"That's kind of like the crumbs that fall to the bottom line over in appropriations (the budget committee)," Begalka said.

The crumbs help make a loaf, however, in the view of the state Department of Revenue.

Doug Schinkel from the state Business Tax Division testified the estimated effect would be $150,000 to $300,000 annually.

Schinkel said the department sees every exemption as bad law because of the erosion against the state's sales tax, which has been 4 percent since 1969.

"Every time we add an exemption it shrinks that base and makes it more difficult to keep that 4 percent rate," he told the committee.