Counties consider extra half-penny tax

Counties are beginning to look at and consider the first-ever option in South Dakota for a county sales tax.

It’s one of the major legislation pieces that some have dubbed property tax relief. Though, others have called the option regressive.

As of July 1, counties in South Dakota have the option to implement a half-cent sales tax. Dollars generated from the new tax must be used to lower the county portion of homeowner occupied property taxes in the county. Money generated from the tax does not go into county budgets. Rather, it is put into a property tax reduction fund. The funds are then allocated as a credit against the county property tax levy on homes in an equal percentage. The bill allows the counties to keep 2% of the amount collected in the first year and up to $20,000 in subsequent years to cover the costs associated with implementing the new tax.

With the option just coming online, counties are taking note and considering it. SDPB reached out to many counties that had not discussed the option yet. However, some are actively considering the option. The Pennington County Commission and the Codington County Commission both held a first reading on the tax proposal. SDPB reached out to Minnehaha and Lincoln County commissioners, but either did not receive a response or could not confirm whether plans are in the works to move forward with the sales tax.

The Department of Revenue is helping counties interested through the process.

“Several other counties continue to evaluate the option and have been seeking additional information from the Department of Revenue,” Michael Houdyshell, Secretary of the Department of Revenue, told SDPB.

Kris Jacobsen also told SDPB it’s been a conversation. Jacobson is the Executive Director of the South Dakota Association of County Commissioners and County Officials.

“Well, at this point in time, I would say counties are discussing the option,” Jacobsen said. “There has been no formal movement by any county that I’m aware of as of yet. Especially since this opportunity just became effective July 1.”

SDPB spoke with Jacobsen prior to a Meade County Commission meeting in which commissioners adopted an ordinance to implement the new tax.

Per the ordinance, the sales tax would go into effect Jan. 1, 2027, should it stick. While counties can implement the sales tax, the citizens of a county can refer it to a vote of the people. That was made allowable when the law, Senate Bill 96, was passed during the most recent South Dakota legislative session.

It’s part of a so-called property tax relief package created this year. The state Legislature and Gov. Larry Rhoden approved a package that relied on using sales and use tax dollars to lower property tax levies at the county and school levels. SB 96, the county tax option, was considered more “targeted” relief and gives areas with high tourism the ability to leverage out-of-state dollars for property tax relief.

However, residents of the county and in the state who spend in the county will pay more on items at the grocery store, and other items that fall under the sales and use tax, if a county implements the 0.5% option. Supporters argue it widens the tax base and provides relief to homeowners.

The bill was championed by incumbent Gov. Rhoden as it made its way through the Legislature. He told SDPB that he views it as a way for local communities to use it as a tool in their toolbox.

“We left as many options available to the local governments as possible. They can, the County Commission can adopt it, or the people can initiate the measure, or it is referable,” Rhoden said. “So it’s totally up to individual counties whether it’s a good fit for them or not, and whether the citizenry agrees with them or not.”

Those opposed to the plan have called the system regressive, saying renters and non-homeowners pay more at the store to fund individuals who own homes.

During the 2026 Legislative Session, opposition to the tax policy was bipartisan. Pierre Rep. Will Mortenson spoke on the House floor, calling it “going out and taxing everyone, and giving it to some,” as well as a “redistribution bill.”

“[This bill is a redistribution] from the poorest South Dakotans to the richest South Dakotans,” Mortenson said. “And from the poorest counties to the richest counties.”

SDPB confirmed with the Department of Revenue that the property tax credits used to reduce owner-occupied property taxes will be applied “in the same percentage amount regardless of the value of the house.”

Despite lots of conversation around the new tax policy, for Meade County the ordinance received no comments when commissioners asked for public input. Meade County houses Sturgis, which sees an influx of tourists during the Sturgis Motorcycle Rally.

It’s something the commission noted when adopting the ordinance during a recent meeting. Commissioners argued citizens would benefit, and that the funds are earmarked specifically for owner-occupied property tax relief.

Projections show Meade County homeowners could save 50% of the county portion of their tax bill. The governor’s office projected a $325,000 home would save $530 on their property tax bill from the new tax.

Homeowners won’t see any savings until the 2027 assessment. That’s taxes payable in 2028.

According to Jacobsen with the Association of County Commissioners, there’s been discussion among both urban and rural counties.

“Well, counties right now are working on their preliminary budgets, and of course, it’s a great discussion point at this time, but I think we all are aware that general public is not always friendly to additional taxes,” Jacobsen said. “So, that will be something that will probably come to light as counties move forward.”

This comes off a tight GOP Gubernatorial campaign in which U.S. Rep. Dusty Johnson made attacking sales tax increases for property tax relief a focal point of his campaign.

According to an April South Dakota News Watch poll, almost half of the respondents polled opposed giving counties the option to raise sales taxes in exchange for lowering property taxes. At that time, only 33% were in support of the idea.

However, counties are taking the option as a way to relieve the tax burden on homeowners. Another county in the mix is Fall River County, which includes Hot Springs and Edgemont.

Joe Falkenberg is Chair of the Fall River County Commission. He told SDPB they’re planning to put it to a vote of the people this Fall.

“The most difficult problem we have in our county is their taxes [are] too high for landowners, for household owners,” Falkenburg said. “These people have been suffering so much, so long. We’re one of the higher counties in the state of South Dakota. So that was my feeling: we need to get relief if we can wherever we can.”

Falkenberg noted not all commissioners were on board, saying some worried it might not work or be used to reduce the tax burden on residents. He shared that he hasn’t heard a lot of feedback outside of a few individuals. But, he said that’s why it’s important to let the voters decide.

“I think the best thing you can ever do is turn it over to the people. We were elected by the people, but that doesn’t mean we know all of the things of how people feel,”

Falkenburg said. “This gives them an opportunity, not anyone else to decide: yes, we’ll take this .5 cents and use it for property tax relief.”
According to the governor’s office, homeowners in the county could see relief around 15% on their property tax bill.