Update Feb.6, 2024
Sorry to report, the SD Senate Taxation committee voted down both good bills on ending food tax.
But there will likely be a ballot measure coming from the public.
UPDATE Feb.2, 2024: Action today in the 2024 Legislature:
The Senate Taxation committee chose SJR 510 from the bills described on Jan.29 below.
It would put this very good plan to end food tax on the November ballot. Voters could end food tax in a revenue-neutral way, preserving city food tax and tax on restaurant meals.
Please ask Senators to support SJR 510 on the Senate floor and send it to the House. The public would love to have this opportunity.
[More discussion topics are now added below in the section called "What to know..."]
UPDATE Jan.29, 2024: Opportunity in the 2024 Legislature
Now there are bills to take tax off groceries! Just what we have been wanting.
SB164 and SJR510 to do a wonderful tax switch: Take the state’s 4.5% off groceries and cover the revenue for it by moving the sales tax rate on non-food back up to 4.5% (up from 4.2%).
With SB 164, the legislature could do it now.
With SJR510, the voters could approve it on the November ballot.
The wording in both bills is the same as Gov.Noem’s bill last year for cutting the food tax, so it is the right wording to get the result we want: The state’s sales tax off groceries; The non-food rate back up to 4.5%: Leaves restaurant food taxed: Does not remove the city portion of food tax(usually 2%).
UPDATE Jan.29, 2024:
House Bill 1001 has been tabled for now.
UPDATE Jan.12, 2024:
House Bill 1001 would make permanent the previous year's cut in the general sales tax rate. It passed the House of Representatives today. Now it goes to the state Senate. So the opportunity is there now.
HB1001 would take away the sunset clause on the 3/10% cut in the general tax rate that passed last year and make that rate cut permanent.
Where's the opportunity in this? Into this year's discussion, we can remind legislators it would cost the state no more to take one whole percent sales tax off groceries than it does to take a tenth of a percent off the general sales tax rate.
Thus, we can ask our state legislators for this alternative tax break: 3% off groceries, rather than preserving the 3/10% off the general sales tax rate.
WHAT TO KNOW about taking state sales tax off groceries:
--- Of all state tax rates on food, South Dakotans pay the 4th highest food tax. Only Tennessee, Oklahoma, Mississippi are higher. In the past year, both Kansas and Alabama have begun to phase down their food tax.
--- Economic growth. Ending the grocery tax, even just this state portion, is more conducive to economic growth, especially along our borders, than the current 3/10% rate cut. SD’ans shop outside our borders due to our grocery tax and buy more than food while there. The SE corner of the state has no grocery store, but a popular Fareway store is at the first exit in Iowa. A man once started a grocery in the SE corner, but it closed in a short time. He said, “Every day people asked me about the tax.”
--- Good Fiscal Policy. The food tax cut would leave more money to South Dakotans to spend locally, while the 3/10% rate cut sends a significant benefit out of state in a benefit to tourists.
-- In general, families benefit more from the food tax cut, rather than the 3/10% cut in the general rate. People can buy used furniture and clothing, but they cannot buy used food. There is a limit to how much families can economize on food before degrading health and children's ability to learn.
--- Food insecurity. Thousands of South Dakotans are food insecure. Food for babies and children is essential for their growth and development and our future health and productivity. Research shows that every percent off food reduces food insecurity.
--- South Dakota is one of the states recognized as having the most unfair tax systems, with taxes proportionately harder on those least able to pay, and easier on those most able to pay.
The tax on food is the most regressive part of sales tax, because some pay a much bigger portion of their income for food than others.
--- In every survey where the public was asked its choice between 1/10% off the general rate v. 1% off groceries, there has been a strong preference for the grocery option. The Legislature would be honoring the public's will and the need by cutting the grocery tax.
--- Some object to cutting food tax lauding SD's “broad based” tax structure. Not to worry. When tax comes off food (leaving it for cities), South Dakota will still be taxing many goods and services that are not taxed in a number of other states. SD will still be taxing our home heating bills, both parts and labor on our car repairs, fitness club memberships, newspapers, funeral services(not the plot but embalming, cremation, & use of hearse), and children’s music lessons. There will still be sales tax on phone bills and an extra 4% if it’s a cell phone. Even without groceries, SD will still have a broad tax base, including these many basic services.
--- What about the “Partridge amendment”? Some legislators are recalling a promise in 2016 to put the 4.5% general sales tax rate back down to 4%, called the “Partridge Amendment”. But there was a previous promise. In 2003, SD eyed the millions of revenue lost by not taxing online sales. To win the Wayfair court case and get to start taxing online sales, certain tax rules forced the food tax --only food-- to go up. Rather than compensate with a state rate cut on food, some legislators said then they would cut the food tax when the state finally receives revenue from online sales. They didn’t put it in statues, like Partridge did, but this food tax cut is still deserved, and the time has certainly come. For 20 years we have been paying more for groceries so that the state can tax online sales. Now the food tax cut (in SB164 and SJR510) gives as much tax relief as the Partridge amendment. Thus, with this tax-switch plan, both promises can be fulfilled. [See story "A Tale of Two Promises" in the downloads at the bottom.]
--- One previous public vote: In 2004 ending food tax was a ballot initiative that lost. The measure had no revenue replacement, and opponents warned of exaggerated dire consequences, so much so that it was impressive that over a third of the people voted for the initiative.
--- Here’s a news article with info about the food tax and a Dec.2023 statewide poll:
It should say, Food purchased with Supplemental Nutrition Assistance Program(SNAP), aka food stamps, is exempt from sales tax. People pay cash for food when SNAP benefits run out, as they do each month.
--- SNAP (formerly called food stamps). Some legislators have claimed there’s no problem because low-income people get SNAP, and SNAP purchases are not taxed. However, only 8% of South Dakotans receive any SNAP benefits, even partial allotments. (Ave $48/week) Therefore, South Dakota's low-income people are buying food with cash and being taxed to do so.
--- There is more tax on a loaf of bread than the farmer gets for the wheat in it; more on a box of cornflakes than the farmer gets for the corn.
--- It’s the right thing to do. We don’t tax food for horses, pigs and pheasants, because they are an “input to production” But we tax food for workers, babies, children. Aren't these an input to production too?
South Dakotans ended the tax on medical services and outlawed paying to use toilets. You don’t pay a tax before you can vote or before you can breathe. No one should have to pay a tax before they can eat.
--- "No other tax so directly takes food off the family table.” -Matt Gassen, former long-time Director of Feeding South Dakota
HINT: If you read farther down this website page, you will come to more reasons to stop taxing food.
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UPDATE March 22, 2023 The 2023 legislature ended without taking any whole percents off food. 😟 Alas. The tax cut was not the sales tax cut we had wanted. We had asked for tax off groceries, but the legislature voted instead to cut the general rate from 4.5% to 4.2%. The bill included a "sunset clause" so that the rate cut would end in 2027 if not renewed. We pointed out: for that revenue, we could have had a whole 3% off groceries.
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.
What to do? Keep reminding state legislators that we want them to cut the food tax. They need to recognize the struggles of SD households. 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: firstname.lastname@example.org
• 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.
•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.)
•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.
update 2/22/23. Newer updates have dates at the top.