South Dakota Codified Law 10-45D-2 imposes a tourism tax of 1.5% on gross receipts at “any lodging establishment, campground, motor vehicle rental, visitor attraction, recreational equipment rental, recreational service, spectator event, and visitor-intensive business.” Visitor-intensive businesses—defined by SDCL 10-45D-1(7) as “any antique shop, book store, candy store, flea market, gift shop, indigenous arts and crafts shop, jewelry, lapidary shop, leather goods shop, marina, novelty shop, pottery shop, rock shop, souvenir shop, and tee shirt shop*” that makes the majority of its money from June 1 through September 30—pay that tax only during those tourist months; all other businesses subject to the tourism tax pay that 1.5% year-round.
The Falls Park Farmers Market operates every Saturday morning from May through September. More than a couple dozen vendors sell a wide variety of locally produced meat, fruit, vegetables, baked goods, canned goods, plants, and a few other items, none of which appear to satisfy the statutory definition of “visitor-intensive business.”
One might scan the tourism tax definitions and think the Falls Park Farmers Market could qualify as a “visitor attraction.” But Spokesperson Susan Randall estimates that folks from outside of Sioux Falls make up less than 5% of the market’s customers. Besides, the tourism tax chapter defines “visitor attraction” not as any place that attracts visitors (in which case the Sioux Falls Hy-Vees and Kesslers in Aberdeen would have to pay tourism tax for attracting so many visitors from surrounding small towns) but as “any business establishment that offers recreation, entertainment, or interpretation of natural or cultural history.” The Farmers Market isn’t putting on a show; it’s selling groceries.
The Department of Revenue has one rusty nail on which to hang its taxing hat in this case. SDCL 10-45D-1(3) says, “A visitor attraction includes any business which is being conducted on the site of another visitor attraction.” If we consider Falls Park to be a visitor attraction, then the Falls Park Farmers Market is conducting business on the site of another visitor attraction, and the Farmers Market has to pay tourism tax.
But wait: that same definition begins by saying a “visitor attraction” is “any business establishment….” Falls Park is not a business establishment; it is a city park. So even that rusty nail doesn’t hold Revenue’s hat.
Statute does not justify charging the Falls Park Farmers Market or any other farmers market the tourism tax. Farmers markets aren’t tourist traps; they are important local businesses providing healthy food and local economic self-sufficiency. Raising their costs gives an unfair advantage to the big corporate grocers who do not have to pay such a tax.
If the South Dakota Legislature can call a special session just to adjust the law dealing with flooded landowners and fishing fans, it can certainly add to its summer agenda a quick amendment to the law that clarifies that farmers markets, which take place in communities around the state, are not tourist attractions subject to tourism tax.
*SDCL 10-45D-1(7) is the only South Dakota statute that mentions the term “tee shirt.”
p.s.: Even the Republican spin blog agrees that imposing the tourism tax on the Falls Park Farmers Market is unjust.