The South Dakota House on Thursday (March 5, 2026) passed Senate Bill 96, a county option plan that would let local governments raise a gross receipts tax of up to one-half percent to reduce owner-occupied property taxes.
The House passed the bill 48-19, with three members excused.
SB 96, introduced at the governor’s request, would allow a county commission to adopt the tax by ordinance. The tax must mirror the state sales and use tax base, except for the rate. The Department of Revenue would administer and collect it.
County proceeds would go into a property tax reduction fund. The county would have to apply the money first as an equal-percentage credit against the county levy on owner-occupied property. If the fund is large enough to cover 100% of that levy, any remaining dollars would be applied as a credit against the county levy on agricultural and nonagricultural property.
Supporters argued the plan keeps control local, and in some places it could shift part of the bill to visitors.
Rep. Mike Derby, R-Rapid City, said Pennington County sees millions of visitors each year. “I really like the idea of someone from out of state helping to pay my property taxes.”
Prime sponsor Rep. John Hughes, R-Sioux Falls, pressed lawmakers to back the plan. “The only reason for a no vote on SB 96 is politics.”
Opponents called the bill a new tax that hits everyone at the register and can reward the counties with the most sales and the highest home values.
Rep. Will Mortenson, R-Fort Pierre, said the structure would shift money upward. “You almost can’t come up with a mechanism that is more of a reverse Robin Hood concept. Take from the poor, give to the rich on this thing.”
Rep. Erik Muckey, D-Sioux Falls, said he supports local control but worried about renters in his district. “The overwhelming majority of our constituents in District 15 are renters,” and would not receive any benefit.
If a county adopts the tax, the ordinance can be referred to a public vote. Voters can also attempt an initiated ordinance to impose the tax.
Under the bill, if an ordinance is referred and approved, the effective date would be the earlier of Jan. 1 or July 1 after the county gives the Department of Revenue at least 90 days notice. Additionally, the bill clarifies that the local gross receipts tax and some other sales taxes are excluded from “gross receipts” if the tax is itemized on an invoice or bill of sale.
The bill now goes to Gov. Larry Rhoden for his signature. Rhoden praised the bill’s passage in a statement Thursday. “Senate Bill 96 will deliver significant property tax relief, and together with SB 245, it will deliver the largest property tax cut in South Dakota history.”
By Todd Epp | South Dakota Broadcasters Association.
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