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South Dakota Might Be Caught in Budget Catch 22

South Dakota Capitol
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Staring at a serious gap to start the session, South Dakota Legislators approved a budget for fiscal year 2018 before adjourning the main session last week.

Matching the expenditures and receivables was an arduous task for the 105 elected officials this year. House Speaker Mark Mickelson of Sioux Falls says when you dig deeper into the figures, there is an interesting bond between ag producers and the internet.

“I think what’s new is how proliferate online sales activity has become. Large farms in South Dakota today are buying their pesticides and other agricultural inputs-not seed corn but everything else-online. That stuff’s not subject to sales tax.”

Mickelson adds that possible adjustments in how states are reimbursed through Medicaid could open a door to a highly-sought source of tax revenue.

“With this Medicaid shuffling of the deck, will be an opportunity for states like South Dakota to get the ability to tax online sales activity as part of any agreement that might be made there. If that happens, then I think we’ll see this erosion taken care of.”

It would probably take three to five more soft years for sales tax collections before Mickelson believes that the state would consider major changes to the tax structure.

The South Dakota Legislature budgeted $4.55 billion for fiscal year 2018.

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