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Remote sellers tax helping drive Mitchell's sales tax collection to new highs

As of November, the city has collected $663,500 from the remote sellers tax, which has helped the city surpass the 2020 first- and second-penny sales tax collections with a month of sales tax revenue that's yet to be tallied.

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Those who make their living from agriculture say they need South Dakota's tax exemptions.

MITCHELL — Mitchell has felt a big impact from the remote sellers tax this year.

With the first full year of collecting remote sellers tax, which taxes internet sales that are made within Mitchell’s city limits, City Administrator Stephanie Ellwein said it’s helped Mitchell collect an average of about $60,000 per month.

As of November, the city has collected $663,500 from the remote sellers tax, which has helped the city surpass the first- and second-penny sales tax collections in 2020 with a month of sales tax revenue that's yet to be tallied.

“We’ve already met our fiscal year budget in sales tax for the fiscal year, and we’ve already exceeded 2020 and 2019 first- and second-penny sales tax,” Ellwein said. “I think a lot of that has to do with the remote sellers tax.”

According to the most recent sales tax reports, as of November, the city’s first- and second-penny sales tax collections were roughly 9% above where they were at the same time period in 2020.

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“Retail trade is a huge chunk of what the city gets in sales tax. In 2019, it was $6.9 million out of the roughly $11.3 million total,” she said. “Having that extra $663,000 is definitely helping us this year.”

Third-penny sales tax – which applies to sales from prepared food, alcoholic drinks, ticket sales and lodging such as hotel stays – have also surged this year. As of November, the city’s third-penny sales tax collections were up 23% compared to the same time period in 2020.

The city began collecting remote sellers tax in late 2019 after the landmark U.S. Supreme Court decision, known as South Dakota v. Wayfair, granted the state the ability to collect online sales from internet-based companies that do not have a physical presence in South Dakota.

Depending on where an online purchase is made from, the sales tax is distributed back to the state and to those communities just as it would be with a purchase at a brick and mortar store. After the Supreme Court decision, more states have followed South Dakota's lead on taxing internet sales

Prior to the implementation of the remote sellers tax, Ellwein said Mitchell was seeing one of the slowest growth rates in annual sales tax collections.

According to Ellwein, Mitchell saw a sales tax growth rate of 1.8% per year from 2009 to 2021, while the average growth rate for the remainder of the state’s first class municipalities was 3.2%.

But the remote sellers tax is helping Mitchell catch up to the rest of the cities’ sales tax growth. As of now, Mitchell’s first- and second-penny sales tax numbers are at $11,297,996, marking an increase of about $60,000 and roughly $7,000 compared to 2020 and 2019, respectively.

With the peak of holiday shopping taking place in early December, the city could end the year with its largest growth in sales tax it has seen in the past decade when the sales tax figures from December are tallied.

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“We are sitting in a good position for 2021, and we are now keeping up with the growth other cities have seen,” Ellwein said, pointing to the remote sellers tax as a major factor behind the increase.

Sam Fosness joined the Mitchell Republic in May 2018. He was raised in Mitchell, S.D., and graduated from Mitchell High School. He continued his education at the University of South Dakota in Vermillion, where he graduated in 2020 with a bachelor’s degree in journalism and a minor in English. During his time in college, Fosness worked as a news and sports reporter for The Volante newspaper.
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