End the Food Tax
in South Dakota

UPDATE 2-2-23 House Bill 1075 passed House Taxation committee on a 12-1 vote. Yay!! Next it goes to House Appropriations Committee. But now there are competing bills in House Appropriations also. They have these three:
HB1075, the Governor’s plan to take 4.5% off food. (Her Bureau of Finance & Mgt (BFM) says the state has enough funds for this.)
HB 1137 cuts the general sales tax rate 4.5% to 4%.
HB1043 cuts some property tax.
    They all would help, but of all the tax cuts, HB1075 will help people the most to put food on the table. No other tax so directly takes food off tables.
    Please let these Representatives know that the first priority for a tax cut should be a cut in the food tax. House Bill 1075 is the best. It takes the state’s 4.5% off food. Please help. These are the Rep’s on House Appropriations:  Chris.Karr@sdlegislature.gov;  Mike.Derby@sdlegislature.gov; Linda.Duba@sdlegislature.gov; Chris.Kassin@sdlegislature.gov; Lance.Koth@sdlegislature.gov; Dennis.Krull@sdlegislature.gov; John.Mills@sdlegislature.gov;  Ernie.Otten@sdlegislature.gov; Tony.Venhuizen@sdlegislature.gov . .


  (HB1095 has not been heard yet in House Taxation. It is designed to be a compromise, in case HB1075 does not pass. It would tax 2% off groceries.)

Note.  HB1075 does not affect city food tax, only the state's portion of sales tax.   

ACTION: Let legislators know you support the Governor’s plan to cut the food tax. Include your reason for supporting it.  

Ideas & Info:

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?

Remember the governor's promise to end the state's food tax. The legislature and governor can, and should, now work together to get it done.

Action in the current legislative session could end the state’s portion of the tax (4.5%). Of course, it would be helpful to end the city portion (usually 2%) also, even tho' that is more complicated.

What to do: We can all think about households struggling to put food on the table, especially this winter 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.
     Important action at the moment: Please tell state legislators that we want them to cut the food tax. We're counting on them for food tax relief this session.

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.

Also, during the session, while they are in Pierre, you can:

  Send a note:  Rep.___ or Sen.___, State Capitol, Pierre SD 57501

  Email: firstname.lastname@sdlegislature.gov

  Phone to leave a message for Senators: 605-773-3821.  For Rep’s 605-773-3851

Does the food tax really hurt? In families with limited budgets for food, the grocery tax is taking food off tables!
    If the state’s portion of the grocery tax is eliminated, everyone would be able to pay for the equivalent of 49 additional meals for their families, or use the savings for other necessities.

Can SD afford this tax cut?  It seems the state now has the funds enough to consider a tax cut. 

     The first tax cut should be on groceries! 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.  (The governor's finance people assure her the state can afford this. Also, Appropriations committee members are the watchdogs of the money. They put in  bills to end the state's 4.5% food tax last session, so they must realize the funds are available.)
    Even if legislators can agree on taking only 2% 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)  Wyoming ended food tax all at once and even reimbursed cities for their portion, so there is no city food tax either.
    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. 


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 even one percent off groceries reduces food insecurity .


How much is SD's food tax revenue? The SD Dept. of Revenue generally estimates food tax at 9% of sales tax, which is only one source of state revenue, albeit a major one. In Feb.2022, the Dept of Revenue estimated $82.5million food tax. If that guess is right, that is 1.43% of the whole state budget. (A poster from 2004 on this is attached below, when it was 1/1%.) For the next fiscal year, July’23-June’24, which the legislature will discuss in the next legislative session, the Revenue Dept. estimates at this point that the state's food tax revenue will be $100million.


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 one of 5 states with 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. 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.


About some details in the bills for those who wonder.

A note about cities: Those rules also say each city may have only one sales tax rate, so they may not have a lower tax rate on food than their rate on non-food.

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.

If you like more historic detail, read the attached page “A Tale of Two Cities.” 


This info from Bread for the World-SD, advocating for ending food tax since 1992.

update 1/31/23

breadsd@gmail.com

map neighbor states food tax.png
1-pg Tale of 2 promises 2-10-22.pdf
poster real pie graphs, from 12'04.docx
foodtax buttons.jpg
% of income spent on food.png