Karels, Gordon V.

English

Public Research Access Institutional Repository and Information Exchange

South Dakota State UniversityOpen PRAIRIE: Open Public Research Access InstitutionalRepository and Information ExchangeEconomics Commentator Economics8-14-1975Growth of South Dakota Retail Sales and Use TaxRevenuesGordon V. KarelsSouth Dakota State UniversityFollow this and additional works at: http://openprairie.sdstate.edu/econ_commPart of the Agricultural and Resource Economics Commons, and the Regional EconomicsCommonsThis Newsletter is brought to you for free and open access by the Economics at Open PRAIRIE: Open Public Research Access Institutional Repositoryand Information Exchange. It has been accepted for inclusion in Economics Commentator by an authorized administrator of Open PRAIRIE: OpenPublic Research Access Institutional Repository and Information Exchange. For more information, please contact michael.biondo@sdstate.edu.Recommended CitationKarels, Gordon V., "Growth of South Dakota Retail Sales and Use Tax Revenues" (1975). Economics Commentator. Paper 73.http://openprairie.sdstate.edu/econ_comm/73COOPERATIVE EXTENSION SERVICE •United States Department of Agriculture CooperatingEconomics IMewsietter Editor:Robert J. AntonidesExtension EconomistEconomics Department * South Dakota State University * Brookings 57006 * (605) 688-4141No. 74 August 14, 1975GROWTH OF SOUTH DAKOTA RETAIL SALES AND USE TAX REVENUESEditor's Note: The following is a Summary report of research recently completed under Dr. William E. Kamps, Assistant Professor.South Dakota is one of 45 statespresently levying sales and use taxes.South Dakota enacted its sales tax in1935 and its use tax in 1939. The SouthDakota Retail Occupational Sales Tax isa tax applied upon the taxable grossreceipts of retailers engaging in business within the State of South Dakota.Retailers are legally entitled to addthe tax onto the retail selling pricepaid by customers. The South DakotaUse Tax serves to supplement the salestax by imposing a tax on tangible personal property not originally purchasedin South Dakota but brought into thestate for use, storage or consumption.The purpose of the use tax is to placea similar tax liability on South Dakotaresidents for purchases of tangibleproperty made in states not employing asales tax or employing a sales tax witha lower rate. Use tax collections represented only about 4 percent of thecombined sales and use tax revenues in1974.Importance of State Sales & Use TaxesDramatic increases in sales and usetax revenues have made these taxes thelargest current source of tax revenuefor the State of South Dakota. In 1960,sales and use tax collections accountedfor $15.7 million or 33 percent oftotal South Dakota tax revenue. By1970, sales and use tax collections hadincreased to $51.3 million and accounted for 47 percent of total tax revenue.Sales and use tax collections totaled$78.5 million and comprised over 51percent of total South Dakota tax receipts in 1974.Factors Affecting Sales Tax RevenuesSales (and use) tax revenue increases can be attributed to threeimportant factors. First, increasingthe rate at which retail items aretaxed can increase revenue. The taxrate measures the extent to which thebase is taxed. The original sales taxact specified a rate of 2 percent. Therate has been changed several timessince then with the most recent changeoccurring in 1969 when the rate wasincreased from 3 to 4 percent.Second, including more items in thetax base can increase revenue. Thesales tax base is composed of thoseitems the legislature has designated astaxable. The base of the sales tax hasalso been chailged several times sinceits enactment.Some of the major changeswere (1) the taxation of room rentalsin 1963, (2) the taxation of certainprofessional and repair services in1965,(3) the taxation of beer and alcoholic beverages in 1969, (4) the taxation of rentals of tangible personalproperty and cable television servicein 1974 and (5) the exclusion of prescription drugs and medicines in 1974.Changes in the base or rate of thesales tax generally apply to the usetax.Third, an increase in purchases oftaxable items brought about by thegrowth of economic activity (includingeffects of inflation) within the statecan increase revenue. Increased economic growth would lead to increasingpersonal incomes resulting in increasedspending on taxable items and thus increased sales tax revenue. The accompanying figure illustrates the salesand use tax revenues attributable tothese three factors for the fiscalyears 1961 through 1974.In the figure,actual revenue in 1961serves as a means of illustrating theadditions to revenue in subsequentyears brought about by changes in thethree previously mentioned factors.Revenues in 1970, for instance, totaled$51.3 million. Base and rate changesoccurring after 1961 accounted for $2.2million and $24.5 million of the revenues, respectively. Increased economicgrowth during the 10-year period wasthe source of $6.4 million of the 1970tlilllenn of DollarsActual Rsvaoua In 1961Bovaauo Du« Co Daso CiungesRovenua Dua Co Rata ChongaaRsvenua Dua Co Eeenonlc Growth18.2 10.4 18.3sales and use tax revenue.Had no base changes, rate changes oreconomic growth occurred during thefiscal years 1961 through 1974, salesand use tax revenues for each of theyears shown would have remained equalto the 1961 revenues of $16.7 million.Sales and use tax revenues for the14-year period 1961 through 1974 totaled $528.8 million. Base changesaccounted for $18.2 million and ratechanges accounted for $189.9 million ofthat revenue. Revenues of $87.1 millionwere the result of economic growth. Inconclusion, legislative base and ratechanges accounted for nearly two-fifths(39.4) percent) of the 1961-1974 salesand use tax revenues.I of Dollars-.001961 1962 1963 1964 1963 1966 ..967 1968 1969 1970 1971 1972SOUTH DAKa.'A SALES AKD USB TAX SEVEKUB DUE TO BA^E CHANGES. RATS CHANGES AND ECCKO^aC CROUTB,1973 19741961-1974GORDON V. KARELS, RESEARCH ASSISTANT, ECONOMICS DEPARTMENTCooperative Extension ServiceU. S. Deportment of AgricultureSouth Dokoto Stote UniversityBrookings, South Dokoto 57006OFFICIAL BUSINESSPenolty for Privote Use $300 AN EQUAL OPPORTUNITY EMPLOYEREconomics NewsletterPosuge and Fees PaidU. S. Department ofAgriculmrcAGR 101Third closs moil

Growth of South Dakota Retail Sales and Use Tax Revenues

https://openprairie.sdstate.edu/cgi/viewcontent.cgi?article=1072&amp;context=econ_comm

Growth of South Dakota Retail Sales and Use Tax Revenues

Abstract

Similar works

Full text

Available Versions

Public Research Access Institutional Repository and Information Exchange