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State Legislature Considers Ending Sales Tax on Food

February 10, 2009

Pierre, SD – A potential tax break on supper is making its way through the South Dakota Legislature. A new proposal would would end the state sales tax on many food items, using what is known as a tax shift. Senator Pam Merchant (D-Brookings) has joined with Representative Joni Cutler (R-Sioux Falls) to cosponsor the legislation.

Unlike other, unsuccessful attempts to entirely remove the sales tax on food, Merchant explains, SB 199 would remove state and city sales taxes only on the types of food normally used to prepare a family meal, and would shift an additional one-half percent tax onto nonfood purchases. This makes the bill revenue neutral, she adds, although sales tax will still have to be paid on certain items.

"Those would be such items as you find in a vending machine -- candy, pop, and some very highly packaged, fully cooked, prepared foods. The majority of your grocery store items are going to be no more tax anymore, but those items that are nonfood will have one-half percent more tax."

Merchant estimates a South Dakota family of five could save up to $600 on its annual food bill with the new taxation method, which she sees as a small but important financial boost during the economic downturn.

"I know people that can use more milk in their refrigerators, or need more fruit for their kids, and they're making very difficult choices. They're just not able to buy enough. The lower-income people simply aren't buying a lot of retail items. And, you know what? You can't buy 'used' food -- but you can buy used clothing."

Some legislators question the wisdom of changing the state's tax structure during tough economic times, although Merchant says the bill has solid support from members of both parties, and in both houses. It will be heard by the Senate and House taxation committees this week.

David Law, Public News Service - SD