Senate committee kills retail-fee property tax swap after rural fairness warnings: Capitol Minute
- Steve Jurrens
- 7 days ago
- 3 min read
A proposal to swap owner-occupied property taxes for a per-transaction retail fee failed 4–3 in Senate Taxation. Critics argued the plan would be unfair to rural areas and disruptive to small businesses
By Todd Epp | Northern Plains News
The Senate Taxation Committee voted 4–3 on Friday to kill Senate Bill 243, ending Sen. John Carley’s proposal to replace property taxes with a retail “transaction fee” that supporters said could eliminate owner-occupied property taxes first.
Why it matters
Property taxes have become the session’s pressure point — not just for homeowners, but for renters who absorb tax increases through higher rents and for farmers facing rising land valuations. SB 243 offered a sweeping, consumer-spending-based replacement plan. The committee’s rejection shows how hard it is to trade a stable, local tax base for a statewide system that hits rural shoppers and small-town merchants differently.
What SB 243 would have done
Carley, a Republican from Piedmont, proposed a $1.50 fee on retail transactions of $15 or more, plus a 10% charge on purchases under $15. The money would have flowed into a new “property tax replacement fund” using a waterfall structure: eliminate owner-occupied residential property taxes first, then agricultural property taxes, then commercial property taxes as revenue allowed.
Carley told lawmakers the Legislative Research Council estimated the system could generate about $800 million a year — more than enough, he argued, to cover roughly $400 million to $500 million in statewide owner-occupied property taxes, with leftover revenue available for agricultural relief.
State budget officials and business groups attacked the plan from multiple angles. Bureau of Finance and Management economist Derek Johnson called the flat $1.50 fee a declining revenue source because inflation would erode its value while property tax replacement needs would continue to grow.
Critics also called the structure regressive: a $10 purchase would face a 10% charge, while a $600 purchase would pay a small fraction of a percent. The South Dakota Retailers Association said the flat fee would treat a modest purchase the same as a big-ticket item — and would push shoppers to consolidate purchases in larger cities, leaving small-town stores exposed.
We’ll be watching whether lawmakers produce relief that lowers real bills — without simply shifting the burden to a different group — before the session ends.
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Rural fairness became the pivot
Support and opposition both framed the same question: who pays more when a per-transaction fee replaces a tax tied to property value. Sen. Amber Hulse, a Republican from Hot Springs, said rural families often shop at multiple stores because they can’t one-stop shop — meaning they would pay $1.50 repeatedly, while city shoppers could make one large purchase at a big-box store and pay the fee once.
What happens next
The committee voted to send SB 243 to the 41st day — a procedural kill that ends the bill for the 2026 session.
But the underlying idea is not gone. A similar property tax replacement proposal is already circulating as an initiated constitutional amendment for the November 2026 ballot, approved for circulation on Nov. 3, 2025. Meanwhile, lawmakers continue to sort through more than two dozen other property tax bills as the session heads toward its final stretch.
