The state Department of Revenue is forcing the Falls Park Farmers Market in Sioux Falls to pay tourism tax. Why?
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.
Those who buy at a farmers market are intending to go home and cook that food. Not a stop on a tourism trip. The main customers are also there because they trust a particular vendor to grow their food since it is not federally inspected they need to get to know the seller. Again, totally not a tourism thing. Just because the May to Sept. timing fits approx the June to Oct market, does not make it tourism. This should have been a no brainer.
Excellent point, Roger. Farmers markets don’t appeal to folks on the go. You can’t make good farmers market stew in a Motel 6 microwave.
Holy cow! Did you know this farmers market opened in 1912?!
Unfortunately the Farmer’s Market agreed to pay the tax to avoid having to pay the back taxes. They will probably never get out of it now…
http://www.argusleader.com/story/news/2017/05/24/farmers-market-concedes-state-collect-tourism-tax/343926001/
This is a symptom of a larger problem. SD relies heavily on the sales (and use) tax. Economists who study such issues note that SD imposes what is likely the broadest and deepest overall sales tax in the US. Recall the wailing and gnashing of teeth when revenues fall below estimates. The reason is our sales tax shortfall. Thus, we need to try to shake a few more nickels from the pockets of ‘tourists’ – even if they are patrons of a farmer’s market.
Katie, I know it’s easy for me to talk when I’m not the one paying the lawyers, but I encourage the Falls Park Farmers Market to reread the law, apply the analysis above, and tell the Department of Revenue to go jump in the Big Sioux.
I would encourage farmers market vendors and customers to attend Republican candidate events and, every time they hear the Republicans talk about South Dakota’s low taxes, throw some farmers market tomatoes at the stage, but such projectilage is (1) illegal and (2) a waste of good tomatoes.
Consider this: at a time when farm revenues have plunged, when all signs are that we’re headed for another year of low prices, when South Dakota farmers could be lurching toward a 1980s-style farm crisis, state government decides to increase costs for farmers and make it harder for them to diversify their operations and income streams. Thanks, Governor Daugaard!
We don’t need a statutory change here. We need Revenue to reread the law and interpret the plain language of the statute correctly.
Maybe the solution would be to move the Farmer’s Market away from the so called tourist attraction at the Falls. As long as they meet in a place that is just for selling produce and nothing else, the tax and spend republicans cannot get their greedy mitts on those nickels.
Jerry, they thought about that but indicated in the news articles that they didn’t know if the Revenue Department would keep hanging the tax on them regardless. I say press: I read the law, and unless the Department of Revenue can show a better read of the definitions, they don’t have a case.
It looks like the Kelo Land scooped all the bloggers. It says that the farmers get the taxes back. That’s all fine if it stops the whining but I, for one, thing farmers get enough tax breaks and really need to pull their fair haul.
The Kelo Land did the scooping way back before lunch it appears. I am not surprised others like the newspaper in Sioux Falls have not picked up on this. I hope the farmers press for damages and demand double the taxes back. Free cucumbers for all.
As the entire state is a tourist trap for the summer, should not all businesses that sell the line items listed then be assessed the tourism tax? Department stores sell tee shirts, why would they not have to pay the tourism tax?
Perhaps my bloggings are being blocked, Mr. jerry, and you cannot read them. The Kelo Land is reporting the tax has been repealed. Nobody has to pay it. You fellows just aren’t watching the real news only the fake news.
Good deal, so how did that repeal thingy work? I confess that I do not have the luxury of seeing Kelo Land, so do tell. Blog on sir..
The Kelo Land is on the internet, Mr. jerry. They said things will be refunded. That’s like repealed, isn’t it?
No, they are different. If you repeal something it is a law thingy. If you refund them that would be taxation without representation so that would show that you had no right to do that in the first place and you got caught doing it. Kind of like the tea party deal in Boston Harbor. Thanks for the information about kelo land.
I see. That is all good to know, and I am glad I pointed it out to you. You’re welcome.
Grudz is right! This post went up at breakfast time; by lunch time, DOR’s Andy Gerlach had reread the law and come to the same conclusion as me, that the tourism tax does not apply to the Falls Park Farmers Market. Hear hear!
I am glad for the farmers, however as a former English teacher you can correct me if I’m wrong but should it be “Mr. Gerlach had reread the law and come to the same conclusion as I?”
This is good news indeed, however, and I hope Mr. Gerlach rereads all the laws his people are enforcing for the legislatures. And I hope the legislatures stop passing laws especially on taxes.
Mr. grudznick, that argument is between you and Cory. I will say this though, Cory’s blog is front page on Daily Kos http://www.dailykos.com/stories/2017/5/27/1666047/-This-week-at-progressive-state-blogs-Killer-budgets-the-GOP-s-phony-moderates-dumb-ads-in-GA#read-more