Deb Peters Lobbies for Ad Industry, Helps Torpedo Proposals to Apply Sales Tax to Advertising

Proposals T, U, and V discussed at yesterday’s Comprehensive Property Tax Task Force meeting all included removing the sales tax exemption for advertising services, which all three proposers—Speaker Jon Hansen (R-25/Dell Rapids), Representative John Hughes (R-13/Sioux Falls), and Senator Taffy Howard (R-34/Rapid City)—said would boost the state budget by $41.3 million.

Quick math: these proposals also included raising the state sales tax back to the pre-July 2023 rate of 4.5%. Divide revenue by rate, $41.3M/4.5%… uff da! Annual spending on advertising in South Dakota apparently reaches $918 million! That’s over $1,000 per South Dakotan… or 1.2% of South Dakota’s $76.8 billion in gross domestic product in 2024.

The Association of National Advertisers watches closely for any sign that government is coming to make them pay taxes like other businesses, and when they see such proposals, they send Deb Peters to kill them. The former state senator from Hartford has lobbied for the ANA against ad tax bills in Rhode Island and Connecticut. Wednesday, she brought her advertising clients’ argument for doing business tax-free to Pierre, where she leveraged her past influence under the dome to tell her colleagues to drop that $41.3M idea. Here’s the letter she submitted with her testimony, plus my commentary:

Dear President Carr, Speaker Hansen, and Members of the Property Tax Task Force,

[Like USD President Sheila Gestring, Peters evidently missed the memo that formal letters end their greetings with a colon, not a comma… or did I miss a meeting on this topic?]

I hope this letter finds you well. I know most of you and I thank you for your continued service to the state of South Dakota. For the handful of the committee members that I have not yet met,…

[That must include Senator Chris Karr, whose name she misspells.]

…my name is Deb Peters and I have extensive experience in state tax law. I’m a former South Dakota State Senator, past President of the National Conference of State Legislatures, and past President of the Streamline Sales Tax Governing Board. I’m writing to you on behalf of the Association of National Advertisers to express our strong opposition to your proposal to tax advertising services.

I spent many years in your shoes where I too worked to lower property taxes in South Dakota. However, the proposals which strip the sales tax exemption on advertising services in order to reduce the property tax are simply shifting the tax burden from property owners to all South Dakota families and businesses with a regressive tax.

Wait, what? I suspect homeowners outnumber the folks who buy ads in newspapers and on radio and television. Shifting taxes from property to advertising services would likely unburden a lot of working-class folks and draw more taxes from wealthier business owners. Wouldn’t ad advertising tax be progressive?

Research shows that advertising taxes harm local businesses and consumers more than the corporations they seek to impact. A study commissioned by Deloitte found that France’s digital advertising tax impacted consumers the most, with 55 percent of the total tax burden passed on directly to them, resulting in a functional tax hike for taxpayers. For small businesses, these taxes lead to more challenging choices – either significantly raising consumer prices, reducing services, laying off staff, or shutting down completely.

France. We’re taking our legislative cues from France now? Don’t tell me Republican legislators are going to swallow that frog juice!

But if we countenance Peters’s obvious globalism, read again: French digital advertisers passed on 55% of the tax burden to their customers, not 100%. Homeowners who pay 100% of their property tax and have no one to whom they can shift their burden would still come out ahead.

Advertisers can’t shift their costs onto people who don’t buy their stuff. If Hy-Vee tries passing its ad costs on to egg buyers, but you get your eggs from the church lady down the road who just puts a hand-painted sign at the end of her driveway (“JESUS LOVES YOU… & FRESH EGGS!”), you and she both just avoided Hy-Vee’s tax burden. Business that spend less on advertising and more on simply making good products that generate authentic word-of-mouth referrals may enjoy an added competitive advantage if advertising is taxed like other services (hmmm… is that what the ANA really fears?).

And how about completely non-commercial ad-buyers, like all of Peters’s politician friends? Tax political ads, and political campaigners can’t pass their tax costs on to voters. They just have to ask their donors for an extra 4.5%, and their donors are mostly from the wealthy class, so once again, the ad tax works out to be progressive!

Residents of South Dakota, like most Americans, are still navigating significant economic pressures, including the lingering effects of runaway inflation that began years ago. This creates even more economic uncertainty for businesses and consumers. Additional taxes would only compound these challenges, driving people and investments out of South Dakota and, in an ironic turn, actually increase property taxes.

No, Deb, I think it’s Jon Hansen and other Republicans driving people and investments out of South Dakota.

And, really, Rube Goldberg much? Another missing cog in your economic-disaster contraption is uncertainty. Hansen, Hughes, and Howard weren’t proposing to tax ads by Trumpian tariff fiat, empowering Governor Rhoden to impose different rates on different advertisers based on who pisses him off in the morning. They all proposed applying the same 4.5% sales tax rate to advertisers that would apply to most other vendors of services and goods. Sounds pretty certain to me.

Proponents of advertising taxes have long argued that they would only affect a handful of multi-billion-dollar companies, but the truth hits much closer to home. Like all business-to-business costs, South Dakota consumers and small businesses will be disproportionately burdened instead.

No, see above: consumers and small businesses will be less burdened by an advertising tax, which they can easily reduce or avoid entirely, with simple business decisions, than by property tax, which they can only avoid by not buying a place to live. And if Peters is going to persist in arguing that trickle-down regressivity is the inevitable impact of advertising tax, shouldn’t she urge legislators to apply that argument to every tax and repeal every revenue-raising scheme the state has? (Uh oh: I hear Phil Jensen clearing his throat. Next paragraph!)

At a time when President Trump is cutting taxes on hardworking families and small businesses, this proposal would impose a tax on every single business advertising in South Dakota, and in turn, raise the price of the goods and services they offer. President Trump has also taken on the battle against advertising taxes and has threatened additional tariffs on countries that do tax digital advertising.

There, now Peters is speaking the modern GOP’s language: Trump says it’s bad, so it’s bad! Heil Führer!

The ability of businesses of all sizes to access online platforms and reach new customers has leveled the playing field, allowing start-ups, local newspapers, and countless small businesses to grow and find success. The last thing South Dakota business owners and entrepreneurs need is a tax on their efforts to tell consumers about the important goods and services they offer.

Actually, maybe the first thing we need is a tax on profiteers barging into our brains on every street corner, webpage, and YouTube video. Maybe an advertising tax is vital not so much to generate revenue but, like the tobacco tax, to charge for the externalities of polluting the public atmosphere with harmful substances.

And don’t let Peters trick you into thinking that an advertising tax treads on sacred First Amendment grounds. Vendors are always free to tell us what they are selling, whether it is important or frivolous. They can open big stores, put big signs in the windows and on the roofs, and jawbone us on the sidewalk and in their store aisles and showrooms for as long as we are willing to stand their pitches. But if they want to buy goods and services from someone else to amplify their pitches, a sales tax won’t infringe their free speech any more than sales tax infringes my free speech when I go buy a megaphone.

In addition to leveling the playing field for South Dakota businesses, advertising is a critical part of South Dakota’s economy. According to an independent study commissioned by the Association of National Advertisers, advertising expenditures generated $16.2 billion in economic activity, while supporting 84,810 jobs in the state. This accounts for 18.1 percent of all jobs in South Dakota. Simply put, advertising is a critical industry for South Dakota and elected officials should be doing everything possible to protect it—not considering legislation that would endanger it.

Now Peters cranks out baloney, citing a study her org paid for to claim that advertising makes possible a fifth of our GDP and nearly a fifth of our workforce. If we got rid of advertising, everybody but advertisers would still have jobs (and advertisers could go get jobs making real things themselves), and everybody would still want to buy groceries and cars and houses and nice things. We just wouldn’t have advertisers drowning us in surveillance-capitalism mind control to push us to buy more and more expensive things.

And a 4.5% advertising tax wouldn’t get rid of advertising any more than a 4.5% grocery tax got rid of groceries.

As a former State Senator, I urge you to focus on ways to harness the state’s opportunity to build a more competitive business environment which would encourage innovation and grow the overall tax base. As a CPA and state tax law expert, I hope that you will see that this misguided idea to tax advertising services would have far-reaching, negative consequences for businesses, consumers, and South Dakota’s economy. For these reasons I urge you to oppose this proposal.

Sincerely,
(signed)
Deb Peters, CPA
Tax Expert and Consultant for Association of National Advertisers

[Deb Peters, letter submitted to Comprehensive Property Tax Task Force, South Dakota Legislature, 2025.10.22]

Oppose it they did: Speaker Hansen pulled Proposal T, and even though Peters spelled his name wrong, Senator Karr buried Proposals U and V. None of the 18 proposals the task force did advance for consideration threaten the sales tax exemption for advertising.