South Dakota reports 10.9% January sales-tax jump; officials urge caution for budget planning

A state revenue official told reporters that January sales-tax collections, which reflect December consumer activity, rose 10.9% year over year, a jump officials called encouraging but possibly anomalous. "They're up 10.9% year over year," the revenue official said, and the month came in "about 14,900,000.0 higher than a year ago" and roughly "9,900,000.0 higher" than the governor's revised projection.

Revenue staff said the office had projected roughly 4% growth for the month and will now examine whether holiday timing, one-time transactions or reporting quirks drove the spike before changing forecasts for fiscal 2027. The revenue official said analysts will present revenue estimates to the Legislature’s appropriations committee next week where members will decide how — or whether — the numbers affect the budget path.

Governor commented that the state is keeping a sizable reserve to handle volatility. He said leaving "12 and a half percent in our budget reserve accounts" remains prudent given uncertainty and that the administration will weigh options — including whether any of the additional revenue is ongoing and can be applied to inflationary adjustments in the budget.

Officials emphasized caution. The revenue official said, "We don't expect we're gonna get 12% growth in sales tax month after month," and that the office must "dig into that, do analysis, and answer the questions" before assuming the increase reflects a new trend.

Next steps: revenue analysts will publish a chart and supporting data on the administration website and the appropriations committee will consider revised estimates at hearings next week.