End the Food Tax
in South Dakota
UPDATE 3-22-23 The 2023 legislature ended without taking any whole percents off food.
The only tax relief that made it through the legislature was 3/10ths of a percent off the general sales tax rate (4.5% reduced to 4.2%). Thus, your tax break on food and other sales- taxable items will be 30 cents off a $100 purchase. We had hoped for $4.50 off each $100 grocery purchase.
Thanks to all who helped advocate for this cause. Now the need continues.
What to do? Keep reminding state legislators that we want them to cut the food tax. They need to recognize the struggle that SD households are in. A cut in the food tax would help stretch food dollars.
(Note: A cut in the state food tax would not have affected city tax.)
To find your state legislators, go to https://sdlegislature.gov/Legislators/Find Enter your address. A colored map shows up. Click anywhere on the colored map to get a box showing your 3 state legislators. Click on their names to get contact info. Email format: email@example.com
• It turns out that even 2% off groceries would help middle- and lower-income households more than 3/10% off the general rate. That's because middle- and lower-income households don't have a lot of cash, after they pay rent/mortgage, car payment, gas for the car, insurance, childcare -- things that don't have sales tax -- and then pay several hundreds for groceries. They do not buy big ticket items, as much as more well-off households.
People can buy used furniture and used clothing,
but they cannot buy used food!
Look at your grocery receipts, and think what you could have bought with that tax. Or think, What other way would you prefer to use that money?
We can all think about households struggling to put food on the table, especially with higher costs on housing and heat as well as on food. If you can, donate to help to them to Feeding South Dakota or local pantries and agencies in your city.
In families with limited budgets for food, the grocery tax is taking food off tables!
With the state’s portion of the grocery tax over a year, everyone could buy the equivalent of 49 additional meals for their families, or use the savings for other necessities.
The revenue for the new cut in the general rate could have made a major cut in the food tax.
The long-ago promise: As legislators promised years ago when the food tax was going up: once the state gets sufficient funds from taxing online sales, the food tax can come down. That time has come.* Revenue has grown sufficiently, especially from taxing online sales, so that we can end this unfair tax without affecting current state programs.
Even if legislators could agree on taking only 2-3% off in the 2023 legislature, that would be a significant down payment on ending the tax.
•Food tax in other states: 36 states and DC do not tax groceries. SD is one of only 3 taxing at the full rate with no offset. (Alabama, Mississippi, SD)
Notably, none of SD’s neighbor states tax groceries, so SD loses businesses and loses tax revenue because South Dakotans often shop just outside our borders where food is not taxed. (Wyoming ended food tax all at once and even reimbursed cities for their portion, so WY has no city food tax either.)
•Could we phase it out? Several states have used a phase-down method to end or reduce their food tax. Examples: GA, SC, NC, and WV ended their state food tax. Food tax in Arkansas and Missouri is now less than 1.5%. Every % off food helps. Happy news: On Jan.1 this year, Virginia's food tax dropped from 2.5% to 1%, continuing their phase down.
A recent study shows that every percent off groceries reduces food insecurity.
•How much is your own family's food tax? Multiply the total weekly cost of your family's food by 3.38. That's how much you would save over a year without state and city food tax. (52 weeks x .065 sales tax rate = 3.38 weeks worth of food, or 49 meals)
•Unfair taxes. South Dakota is recognized as having one of the most unfair tax systems, taking a bigger share of income from struggling households than from wealthier ones. The food tax is the most regressive part of sales tax.
•Refund programs do not work. South Dakota tried one for several years. It missed approximately 98% of low-income South Dakotans.
•Food stamps(aka SNAP). Food purchased with SNAP is not taxed (thankfully!). Does that solve the problem? No: (1) SNAP participants are expected to buy some of their food with cash. Often, later in the month, food is bought with cash and taxed.
Note that a great many low-income households receive no SNAP at all or only a partial benefit. As incomes rise toward the eligibility limit, SNAP benefits are reduced to a $23 minimum and then ended. Of the population of South Dakota, 12.3% live below the poverty level (Other sources say 10.9%). However, only 7.8% of South Dakotans receive any SNAP(food stamps) at all.
•Nursing homes. Food is a very big expense for nursing homes. They need this tax relief. (Curiously, nursing homes pay food tax, but hospitals don't.)
•Hunger in South Dakota: According to Feeding South Dakota, One out of every eight South Dakotans is food insecure. These are our neighbors who lack access at times to enough food for an active, healthy life. They have limited or uncertain availability of nutritionally adequate food and often make trade-offs between other basic needs and adequate food. Part of their scarce income goes for the tax. Taxing groceries is only one of the causes of hunger in our state, but it is one.
•Special note to people from Rapid City, Mitchell, Spearfish, Pierre, New Underwood, or Wentworth, please read the historic note and the attached page “A Tale of Two Cities.” Your food tax has gone up the most in order for the state to get new revenue by taxing online sales. You might have the most reason to complain about the tax not coming down while new state revenue has been coming in.
You shouldn’t have to pay a tax before you can eat.
* Historic note and recent history:
Over the past 18 years you have been paying higher tax on your groceries in order to make it possible for South Dakota to get revenue by taxing online sales. Back in 2003, tax rules were changed to follow "sales tax streamlining" rules to allow for taxing online sales, but the collateral damage was an increase in the food tax, only food. Some legislators said back then that they would cut the food tax when the state finally receives this new revenue. Now South Dakota is receiving millions in revenue from taxing online sales. Thus, by now the legislature should have recognized the sacrifice that grocery shoppers have made for this and should have started reducing the food tax.
Some tried. A bill in the 2022 legislature passed the House by a vote of 47 to 22. But alas! The bill died in the Senate, 9 to 22. A 2023 Senate vote, 18-17, also passed a food tax cut that died in the House.
If you like more historic detail, read the attached page “A Tale of Two Cities.”
In the downloads below, the pie graph was made by church ladies in 2004.
This info from Bread for the World-SD, advocating for ending food tax since 1992.