2019 South Dakota Legislature End-of-Session Report

Date: May 17, 2019

Future online sales tax collection dominates debate

State Director Lindsey Riter-Rapp recaps the small-business agenda following the March 13 adjournment

While there were several issues discussed during the 2019 legislative session impacting small businesses, much of the discussion focused on how to handle the collection or any monies generated from future online sales tax collection by the state due to the United State Supreme Court’s decision in South Dakota v. Wayfair.

Tax Issues
  • The first measure introduced in response to the U.S. Supreme Court’s Wayfair decision was Senate Bill 86. This bill was introduced by Sen. Jeff Partridge and provided that if the revenue generated in a calendar year exceeded the revenue generated in the immediately preceding calendar year by at least $20 million, the Appropriations Committee may introduce legislation to reduce the sales tax rate. The bill was heavily amended throughout its life in the Legislature and was ultimately tabled by the House, 56-8 on March 7.
  • Similar to SB 86, Sen Reynold Nesiba introduced SB 160 which states that if the revenue generated in a calendar year were to have exceeded the revenue generated in the immediately preceding calendar year by at least twenty million dollars, the committee may introduce legislation to reduce the sales tax rate. However, the money would have been specifically earmarked for the reduction of the rate of tax on food. Senator Nesiba stated this would fulfill a promise made many years ago when municipalities had to raise their tax on food. This bill had a short life as it was killed in Senate Taxation, 4 -3, on February 20.
  • Finally, Rep. Chris Karr introduced HB 1249, a hoghouse vehicle bill that was to revise certain provisions regarding sales tax. This bill would have measured the health of the economy by analyzing gross sales tax receipts. When it was determined that the economy was healthy, the bill would automatically start backing off the sales tax rate and return money to taxpayers. The process would likely have played out over five to ten years. Representative Karr withdrew the bill on February 22 in House State Affairs.

In response to these measures, Gov. Kristi Noem’s administration took the position that it was too early for plans to be made on how to handle any monies generated until sufficient time has elapsed and the state had concrete information relative to the actual monies generated from the collection on taxes from remote sellers.

Other Tax Issues
  • SB 106 would have allowed counties to enact a bed, booze, and board tax of up to 1%. Proponents believe that the money collected from SB 106 would help with growth and crime costs. However, NFIB joined other opponents of the measure to oppose the tax increase and it was defeated by one vote in the first committee to consider it.
  • HB 1163 would have established a Tax Revenue Study Task Force to study South Dakota’s tax structure and to make recommendations to the Legislature on improvements. The end date for the Task Force was December 31, 2021, at which time the Act would have been repealed. Proponents believe that a Task Force to study and make recommendations for taxes could increase South Dakota’s economic development. Opponents were against increased taxes. The bill was killed ultimately 8-4 in the House Taxation Committee.
Balanced Budget Amendment

There were multiple efforts once again to rescind House Joint Resolution 1001, which was adopted by the Ninetieth Legislature and supported by NFIB. The resolution made a formal application to Congress to call an Article V constitutional convention, or convention of the states, for the purpose of a balanced budget amendment to the Constitution of the United States of America.

One such measure, HJR 1002, was defeated with strong opposition by NFIB. NFIB testified in opposition to a repeal of this resolution, reminding the Legislature that small-business owners continue to remain frustrated with the federal government’s failure to address the budgeting that every citizen and small business must adhere to in their daily activities.

Similar to HJR 1002, SJR 4 sought to rescind House Joint Resolution 1001. SJR 4 had considerable debate throughout the Legislature. It ultimately failed to pass the Senate, 16-17, on February 12. There was an intent to reconsider but there was no motion made. NFIB also testified against this measure.

Unemployment Insurance
  • HB 1034 reduces the unemployment insurance contribution rates for employers by .05% in 2020 while still maintaining a healthy trust fund balance. Not only did this bill have NFIB’s support, it had the overwhelming support of both houses with only one “no” vote throughout its life in the Legislature. It was signed by the governor on March 20.
  • HB 1035 renames the unemployment insurance program to the reemployment assistance program to more accurately reflect the intent of the program. Despite the bill’s simplicity, there were a number of opponents. However, the bill did pass and it was signed by the governor March 29.
Employment
  • The issue of employment for active duty members and their spouses was considered this year and a bill addressing the same passed overwhelmingly. HB 1111 provides for the professional or occupational licensure of an active duty member of the armed forces of the United States or their spouse. Under the bill, the active duty member or their spouse must hold in good standing the same or similar valid license, certificate, registration, or permit required for the practice of any business, profession, or occupation issued by another state or the District of Columbia. The bill had overwhelming support as there was not a “No” in any committee or chamber.
  • Another bill which had a significant amount of support was SB 35. This bill allows the State Electrical Commission to refuse to issue, revoke, or suspend a license, or limit the scope of practice of any licensee for conviction of certain crimes of violence.
  • A bill that had much less support and ultimately failed to pass the Senate was SB 120. This bill would have reduced the maximum amount of time for a non-compete covenant from two years to one year, including insurance producers. Sen. Brock Greenfield voiced his support by emphasizing that South Dakota needed to level the playing field and further stated that South Dakota was one of two states that allowed non-competes for up to two years. However, the bill failed to pass the Senate by a vote of 16-18.
  • SB 166 was introduced to revise certain provisions regarding occupational licensing. A hoghouse vehicle bill, the bill stated that the Legislature shall review and make recommendations for the improvement of occupational licensing in the state. The bill’s sponsor, Sen. Wayne Steinhauer, asked the bill to be tabled on February 11.

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