Codington County Commission Approves 0.5% Gross Receipts Tax for Property Tax Relief in Watertown, SD

Northeast Radio SD News – Watertown, SD - After weeks of discussion and a public hearing Tuesday morning, the Codington County Commission voted 4–1 to adopt Ordinance 83, establishing a 0.5% county gross receipts tax and corresponding use tax beginning January 1, 2027.

The measure is intended to generate revenue for a dedicated property tax reduction fund aimed at lowering owner‑occupied property taxes across the county.

The ordinance is made possible under a new South Dakota law passed during the 2026 legislative session, giving counties the option to impose a local gross receipts tax specifically for property tax relief.

Commissioner Lee Gabel moved to adopt the ordinance, seconded by Commissioner Myron Johnson. Commissioner Tyler McElhaney cast the lone no vote.

What Ordinance 83 Does

County Auditor Brenda Hanten read the full ordinance into the record, outlining its seven sections:

·         Section 1 creates a property tax reduction fund and states the tax’s purpose: “to provide needed revenue while reducing the burden of property tax for Codington County.”

·         Section 2 imposes a 0.5% gross receipts tax on all businesses already subject to South Dakota’s retail sales and service tax.

·         Section 3 imposes a matching use tax on goods used, stored, or consumed in the county.

·         Section 4 directs the South Dakota Department of Revenue to collect the tax.

·         Section 5 states the tax must be interpreted consistently with SDCL 10‑45 and 10‑46.

·         Section 6 outlines penalties for failure to report or remit tax.

·         Section 7 contains a standard severability clause.

The ordinance’s first reading occurred July 7, 2026.

Public Comment: Concern Over Regressive Impact

Only one member of the public spoke during the hearing.

Doug Allen, a City Councilman, addressed commissioners briefly before leaving for a medical appointment, stating he opposes the ordinance.

“It’s a regressive tax,” Allen said. “There are an awful lot of people, primarily low‑income people, that don’t own homes… I think this is the wrong way to go about it.”

Allen acknowledged that property tax relief is appealing but urged commissioners to consider the impact on residents already struggling with rising costs.

“If you’ve gone to a grocery store lately, you know everything costs more money now,” he said. “That’s having a very real impact.”

No other public comments were offered.

Commission Discussion: Revenue Estimates and Tax Scope

Commissioner McElhaney asked whether the county had received projected revenue estimates from the state.

Commissioner Gabel responded with calculations based on Watertown’s taxable sales:

“The rough number would be about $5.6 million a year,” Gabel said. “Dividing Watertown’s 2% tax by four gives you a rough idea.”

Gabel also cited the state’s projection for property tax relief:

“For a $350,000 valued house, the savings would be about $821.”

Auditor Hanten confirmed the revenue must be deposited into a dedicated property tax reduction fund, and commissioners will later decide whether to apply projected revenue immediately or wait for actual collections.

Gabel added that the ordinance may shift how counties think about economic activity:

“This is something other states have tried… It’s going to cause us as county commissioners to think more about sales and business in our county in a different way, as opposed to just valuations on property.”

Clarifying What Is Taxed — and What Isn’t

Commissioner McElhaney asked whether the tax applies to agricultural or construction machinery.

Gabel clarified:

“No, it wouldn’t pertain to that kind of machinery. Cars, farm machinery, construction equipment — those are subject to excise tax under a different statute.”

He added:

“It pertains to the things a city gathers sales tax on. The same statutes about what’s taxable would govern this.”

Final Vote

The commission voted by roll call:

·         Troy VanDusen — Yes

·         Myron Johnson — Yes

·         Randy Schweer — Yes

·         Tyler McElhaney — No

·         Lee Gabel — Yes

The ordinance passed 4–1.

The new tax will take effect January 1, 2027.

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