On Wednesday the Comprehensive Property Tax Task Force kicked 18 of its 27 tax reform proposals up to the Executive Board for further consideration. One of the rejected proposals was Proposal F, hard-working Rep. Greg Jamison’s (R-12/Sioux Falls) proposal to prohibit Airbnbs from being taxed as owner-occupied. SDCL 10-12-42 caps the school levy on family homes at 0.002518%—$2,518 per $100K of property value. Jamison’s Proposal F would allow school districts to tax those short-term rentals masquerading as regular residences at up to 0.005211%—$5,211 per $100K of value, the maximum rate applied to commercial properties.
Entire houses rented out to travelers ought to already be subject to the commercial property tax rate. SDCL 10-13-39 says a property owner can have only one dwelling, his or her principal place of residence, classified as owner occupied. A second property across town or out in the Hills rented out to Airbnb customers can’t qualify as owner-occupied.
Jamison’s Proposal F would thus appear to have only affected properties where the owner lives and rents out the basement or the upstairs or the mother-in-law studio out back. Proposal F would have directed the Department of Revenue to notify counties of any owner-occupied properties remitting sales tax on lodging activities. Upon such notice, the counties would have to reclassify those properties. So the only way an in-house Airbnb host could have dodged higher property tax would have been to also dodge sales tax, and that’s just naughty.
One might think the Republicans on the committee would have supported Proposal F. Republican lawmakers’ willingness to raise taxes usually depends on being able to say they’re raising taxes on out-of-staters. Folks renting out spare suites in their homes could pass the additional tax burden on to their visiting customers.
But switching a $500K house from owner-occupied to commercial could result in $13,465 in additional property tax. Rent that basement suite out 180 nights a year, and you’d still have to add an extra $75 to each night’s stay to recoup the tax increase. Maybe the task force figured that cost was impractical, especially for the smallest players in the Airbnb sphere, the folks who rent portions of their own homes out for a little spare cash and aren’t turning themselves into mini-motel magnates by buying up small family homes, turning them into tourism cash cows, and exacerbating the housing shortage.
They like to say their raising taxes on outsiders and apparently can’t.
South Dakota receives 3.8 billion from the feds.
The insiders of South Dakota pay into the fed and get back a billion dollars more than they pay in.
When the welfare farmers and ranchers increase that amount this year It will be a much higher. The moocher citizens of So Dak. let everyone else pay 43% of the tab of running the state in 2025.
Maybe South Dakota should try to reduce that amount.