State revenue official outlines option for up-to‑half‑cent county sales tax to reduce owner‑occupied property taxes

Department of Revenue Cabinet Secretary Mike Howdieshall told the Yankton County Commission on July 7 that Senate Bill 96 gives counties the option to levy an additional county sales tax of up to 0.5 percentage points to create a fund dedicated to reducing owner‑occupied property taxes.

"It is optional," Howdieshall said. "The county has to enact the ordinance. . . . The earliest that a county could have a sales tax in place would be 01/01/2027." He told commissioners the county must give the Department 90 days' notice before an effective date and that, under state law, the tax may only take effect on January 1 or July 1.

Why it matters: the tax is structured so proceeds are deposited into a dedicated property‑tax relief fund and, initially, benefits only owner‑occupied properties. Howdieshall walked the commission through dollar examples: using South Dakota's current averages, a half‑cent county tax could replace the county portion of property taxes for many homeowners in some counties. "On that $325,000 house in Yankton County ... [the owner] would see about a $950 reduction in their total property tax bill," he said, referencing the Department's county‑level estimates.

How the tax would work: the county sales tax would mirror municipal sales‑tax mechanics—any item taxable under state law and municipal tax would be taxable under the county option, and common exemptions (agricultural purchases, farm machinery purchases, certain medical services) would remain exempt. Howdieshall emphasized that many routine household payments—mortgages, insurance, some vehicle charges—aren't subject to sales tax and so wouldn't contribute to offsetting a property‑tax credit.

Commission questions focused on who benefits and how the reduction appears on tax statements. "Owner‑occupied is a property‑tax classification," Howdieshall said. To claim the credit a property must be classified as the owner's primary residence by the director of equalization; renters do not receive a credit. He also noted that property‑tax reductions tied to an adopted county sales tax would appear on tax bills; sales‑tax proceeds would be remitted to the county twice monthly by the Department and placed in a dedicated fund.

Timing and interaction with other law: Howdieshall noted Senate Bill 245, passed this session, will increase state sales tax slightly and dedicate that increase to reducing the school portion of owner‑occupied property taxes. Taken together—state changes plus an optional county half‑cent—the Department's example showed combined homeowner savings on a $325,000 house of roughly $1,493.

Next steps: Howdieshall offered to provide the commission with the Department's county revenue estimates and a sample ordinance and implementation guide. Commissioners asked for additional detail on local projections and whether the commission could put the option directly on the ballot; Howdieshall said the statute's referral language could be clarified in a future legislative session but that the action is referable and voters may also petition the issue.

Provenance: The presentation and subsequent Q&A were recorded in the meeting transcript beginning with Department remarks and examples; commissioners' follow‑up questions and staff clarifications are included in the recorded exchange.

Ending: The commission heard the briefing and requested more county‑specific estimates and an implementation sample; no formal county action on adopting a county sales tax occurred at the July 7 meeting.