Rapid City government has formally adopted a resolution in opposition to the initiated measure seeking to repeal the state tax for items used for human consumption.”
IM 28 would prohibit sales taxes on items sold for human consumption in South Dakota, though the proposal has faced some criticism as election season heats up.
City attorney Joel Landeen said this move comes at the request of mayor Jason Salamun.
“The basis for the objection is concern over what it will do for the cities sales tax revenue, which as all of you are aware is the largest portion of the city’s revenue, or the city’s largest revenue source,” Landeen said.
While a fiscal note on the measure from the Legislative Research Council says municipalities may continue to collect tax on consumable goods, opponents have noted a separate state law allows municipalities to collect sales tax only if it conforms to state tax.
Landeen said it’s a practical, not political objection to the measure.
“Our sales tax is collected along with the state sales tax, so it doesn’t cost anything, and it’s collected by the state," Landeen said. "It is really unclear what will happen if the state is no longer collecting sales tax for these items. We will either need to likely contract with the state to collect that tax on our behalf, or we will need to stand up our own collection of the tax.”
Landeen said to do that locally would mean additional hires at city hall, which he says would likely be impossible while losing this revenue.
“You all understand that if we had to slash six or seven million dollars or more from the budget, its going to result in a decrease in services," Landeen said. "Certainly, no way we can do that without eliminating a number of staff positions, because the greatest expense to the city is probably staff or employees.”
Landeen described the $6-$7 million estimate as “conservative.”
Supporters of the measure say a sales tax on groceries is regressive. They also say some of the higher revenue loss estimates are overblown.
Election day is Nov. 5.