A legislative panel is backing a move to make South Dakota’s temporary 4.2% sales‑tax rate permanent.
On Friday, the Senate Appropriations Committee voted 6‑3 to advance Senate Bill 195, sending it to the full Senate. The current rate, reduced from 4.5% in 2023, is scheduled to return to 4.5% in July 2027.
Sen. Chris Karr of Sioux Falls, who championed the original tax cut, has repeatedly pushed to keep the 4.2% rate in place. No other supporters testified Friday, while opponents included lobbyists for the South Dakota Retailers Association, the South Dakota Farm Bureau, and the Greater Sioux Falls Chamber of Commerce.
Five Republicans—Ernie Otten, Mark Lapka, Taffy Howard, Mykala Voita and John Carley—and Democrat Red Dawn Foster voted in favor. Republicans Glen Vilhauer, Paul Miskimins and Larry Zikmund opposed the bill.
South Dakota’s sales tax was raised from 4% to 4.5% in 2016 to boost school funding and provide property‑tax relief. Some, including U.S. Rep. and gubernatorial candidate Dusty Johnson, have suggested using the future revenue increase—when the tax rate returns to 4.5%—to provide additional property‑tax relief. Karr rejected that idea, arguing that tying sales‑tax hikes to property‑tax relief is unsound tax policy.
The bill’s House sponsor, Speaker Jon Hansen, is also running for governor and supports one‑time rebates for homeowners along with a 5% cut to state government spending for long‑term relief. Lawmakers are considering that budget reduction in the Joint Committee on Appropriations.
A separate proposal aligning with Johnson’s approach failed in the Senate Taxation Committee earlier Friday on a 4‑3 vote.
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