Rookie Senator John Carley (R-29/Piedmont) tried to spare his radical Black Hills friends Mike Mueller, Julie Frye-Mueller, and Matt Smith the trouble of petitioning a retail transaction tax onto the November ballot by pushing his own Senate Bill 243 to enact a tax on retail transactions to take the place of property taxes.
Keep petitioning, Team Mueller: Senate Taxation rejected SB 243 Friday as a regressive, anti-rural tax proposal.
Technical details first: SB 243 offers the same basic tax as Team Mueller’s initiative: $1.50 on every retail transaction of $15 or more, 10% tax on every purchase under $15. Unlike the Mueller initiative, SB 243 does not abolish property taxes: counties keep levying property taxes, but the state sends them money from the retail transaction tax to lower the levies, first on owner-occupied homes, then on farms and ranches, then on businesses. While the Mueller initiative writes its property tax ban and retail transaction tax into the South Dakota Constitution, SB 243 is a simple law, which the Legislature could change any time without statewide voter approval.
SB 243 fills one gap left by the Mueller initiative: SB 243 defines “retail transaction” as “the sale, lease, or rental of tangible personal property, services, or products transferred electronically, other than for resale, sublease, or subrent”. SB 243 makes clear that it will charge you $1.50 for every trip to the grocery store, every fill-up at the gas station, every visit from the plumber, every session with your accountant, and every order from Amazon.
Arguing for the retail transaction tax to Senate Taxation (SDPB video, 2:17:50), Senator Carley said that he understands the opposition to creating a new tax but that the Legislature has shown no stomach this Session for providing property tax relief the way he’d prefer, through budget cuts, so he has to resort to providing replacement revenue.
Like everyone else on Team Mueller, Senator Carley showed he can’t do math*. Senator Carley claimed that the $1.50 SB 243 would add to a $300 Costco trip would be less than the $15 the “county tax”—Governor Larry Rhoden’s proposed optional county sales tax in Senate Bill 96, which Senate Taxation approved unanimously Wednesday—would impose on the same retail transaction. Wrong: SB 96 provides for a maximum 0.5% county sales tax. 0.5% of $300 is $1.50.
Senator Carley also claimed the Legislative Research Council initially estimated that the retail transaction tax ballot measure could generate “about $1.5 billion”. Senator Carley misreads the fiscal note by about $330 million: the LRC reported on October 29 that the $1.50 retail transaction tax would generate $1.167 billion.
Senator Carley claimed that LRC later revised its estimate to around “$800 million-plus.” That lower figure would certainly be closer to my independent calculation of $509 million and my tourism-adjusted LRC figure of $754 million. But I have seen no press release from LRC and no news coverage saying LRC has scaled back its estimate. The Secretary of State’s ballot question webpage continues to offer the original October 29 fiscal note, with no indication of any change, and petitioners are surely still showing voters the petition and circulator handout with the original $1.167 billion figure, which is still far short of the $2.018 billion LRC says local governments collect in property tax revenue.
But hey, if Team Mueller is willing to acknowledge that its retail transaction will not fulfill its promise to “completely cover the annual total of property tax revenue in the state,” let’s not stand between them and fiscal reality.
Bringing more reality, Derek Johnson from the Bureau of Finance and Management testified that SB 243 “is likely a declining revenue source for an ongoing growing revenue need.” Budgets and property taxes grow while SB 243 caps the transaction tax at $1.50. He said the retail transaction tax is regressive, changes consumer behavior, and hurts small businesses.
Eight lobbyists rose to second BFM’s critiques. Perhaps the most compelling statement came from Angela Ehlers, who represents the South Dakota Association of Conservation Districts but also spoke for herself and her 500 neighbors in Presho:
We have a grocery store, a lumberyard, a couple bars, several churches, and a gas station and a café. We have a lot of small transactions. Already we are close enough to Pierre, and we are on the Interstate, so we are close enough to Sioux Falls and Rapid City, we lose a lot of business to the Walmarts and the Costcos and all of those. We live with smaller transactions… get a gallon of milk and a loaf of bread. This is just going to… encourage people to go to the big towns and get those because they’ll pay less tax, they won’t be paying the 10%…. We’ll lose our grocery store. We’ll lose our lumberyard. We might lose a bar, we might lose the gas station. That’s what happens when you send local business out of town. And it really messes up my city budget [Angela Ehlers, opponent testimony on SB 243, Senate Taxation, 2026.02.20, transcribed from SDPB video, timestamp 2:40:22].
Rookie Senator Amber Hulse (R-30/Hot Springs) picked up on that rural unfairness, arguing that city folks have big-box stores where they can pick up everything at once while folks in rural towns like Presho and Edgemont have to make multiple stops at smaller stores. SB 243 would thus saddle rural folks with more retail transaction tax payments than their city cousins.
On its second try, Senate Taxation voted 4–3 to kill SB 243. The fourth vote came from Senator and Taxation Chair Sue Peterson (R-13/Sioux Falls), who heard none of the testimony on SB 243 and missed the initial vote to defer the bill to the 41st day.
If Team Mueller wants a retail transaction tax, they’ll have to keep circulating their initiative petition to get it in front of the voters. They have until May 5 to collect 35,017 signatures and submit their petition to the Secretary of State.
*Floating more decimal points, Mike Mueller said in his proponent testimony that Black Hills Federal Credit Union claims in a current ad to get 11,698 swipes per second on its Visa cashback card. Mueller said multiplying that figure by 3,600 seconds per hour, then by 40 business hours per week, then by an average of 80 cents per transaction, “you’d come up with $70 million in revenue with transaction tax.” Assuming he meant annual revenue, Mueller was off by three decimal places: at the rates Mueller cites, BHFCU’s cards would generate $9,358 in retail transaction tax per second, $33.7 million per hour, $1.347 billion per business week, and $70.08 billion per year… which only shows that if I spent every day math-checking every claim that Mueller, Carley, and other wingnuts make, I’d never get my breakfast eaten.