Amateur baseball umpires, libraries, newspapers, lawn-care services, mink farms, rodeo clowns and sellers of ostriches and emus are among the many and varied entities that would lose tax exemptions under a plan referenced Tuesday by Gov. Mike Rounds during his State of the State address.
Those entities and many more currently enjoy exemptions from state sales and use taxes. But with the economy faltering and state revenue projections declining, Rounds is proposing to repeal some exemptions to raise an estimated $3.054 million in ongoing revenue for the state and up to $1.6 million for cities.
Rounds said Tuesday he believes "it's better to have previously exempted products included in our tax base rather than increase tax rates on everybody else."
"When it comes to sales taxes," he continued, "the best taxes are those where the burden is shared as equally as possible without special exemptions."
In recent years, legislators have regularly attempted to add more exemptions into the law. Last year, for example, some legislators tried unsuccessfully to exempt the receipts received by nonprofit organizations from a shooting range or trap-shooting facility.
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Some of the exemptions that Rounds now wants to repeal have only been on the books a few years. In 2005, legislation to exempt the gross receipts of any person officiating an amateur sporting event -- not including elementary, secondary or postsecondary school events -- passed through the Legislature with only one "nay" vote.
Rounds vetoed the legislation, but the Legislature overrode the veto. Amateur baseball umpires are the primary beneficiary of the exemption, and longtime amateur baseball player and former state Rep. Dave Gassman, D-Canova, was the legislation's prime sponsor.
Legislation filed this year, Senate Bill 43, would repeal the exemption for amateur sports officials. It also would repeal exemptions for the gross receipts of rodeo promoters, stock contractors, stock handlers, announcers, judges and clowns.
State Rep. Lance Carson, R-Mitchell, a longtime volunteer for the Corn Palace Stampede Rodeo, said the loss of the rodeo exemptions would negatively impact the summer rodeo in Mitchell. If the rodeo spends a combined $50,000 on a stock contractor, announcer, clown and bullfighter, Carson said hypothetically, the addition of a 6 percent sales tax to those services would increase the rodeo's costs by about $3,000.
"They're going to have to come up with that," Carson said, referring to rodeo committee members, "because the stock contractor and announcer and bullfighter aren't going to take a drop in their income."
Senate Bill 43 is only one of four bills already filed that would repeal existing sales- and use-tax exemptions. The bills were filed before Tuesday's opening day of the Legislature by the Committee on Taxation and at the request of the Department of Revenue and Regulation, which answers to the governor.
Following is a summary of the existing sales- and use-tax exemptions that would be repealed by the other bills. Sales taxes are applied at a rate of 4 percent by the state and up to 2 percent by cities, and use taxes are owed when South Dakota residents purchase an item but are not charged sales tax.
- Senate Bill 44: Gross receipts from sales of ostriches, emus, rheas and furbearing animals raised in captivity for breeding or other purposes, such as foxes, rabbits, minks, chinchilla and karakul.
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- House Bill 1072: Gross receipts from the sale of property that the buyer intends to lease, such as leased office or construction equipment; ink and newsprint when used in the production of shoppers' guides; gross receipts from the sale of agricultural and industrial production equipment in international commerce; and equipment, such as that used by a contractor, older than seven years that was purchased elsewhere and transferred to South Dakota for use here.
- House Bill 1073: Chemicals purchased for use by lawn and garden services; freeport merchandise and stocks of merchandise brought as foreign or domestic merchandise into South Dakota's foreign-trade zone in Sioux Falls; and the gross receipts from library copying charges (even a single 10-cent copying charge would be taxed and, in Mitchell, where the tax rate is 6 percent, the tax would be rounded up to one penny).
Additionally, HB1072 would eliminate the six-month extension on sales-tax remittances available to manufacturing, fabricating or processing businesses.
Also, HB1073 would change the exemption for the gross receipts from the sale of coins or currency so that only the value above the face value would be exempt. For example, if a collector sells a 50-cent piece for $10, the tax would be applied only to the 50-cent face value. Currently, the entire value of the transaction is exempt from sales and use taxes.
Rounds indicated to legislators Tuesday that he expects a fight on some of the proposed exemption repeals.
"These people and groups will argue that they are special and should continue to receive special treatment," he said. "I hope you will resist those arguments."
