South Dakota Lawmakers Debate Sales Tax and Property Tax Reforms

County sales tax option advances, while effort to make statewide sales tax cut permanent fails

Feb. 25, 2026 at 6:55pm

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South Dakota lawmakers are considering two proposals related to taxes - one that would allow counties to impose a sales tax to offset homeowner property taxes, and another that would make a temporary statewide sales tax reduction permanent. The county sales tax plan advanced in committee, while the effort to extend the statewide sales tax cut failed.

Why it matters

These tax proposals reflect ongoing debates in South Dakota over how to provide property tax relief, especially in areas with rising home prices and property taxes like Sioux Falls and the Black Hills. The outcome could impact household budgets and local government revenues across the state.

The details

The county sales tax plan, proposed by Republican Gov. Larry Rhoden, would let counties levy up to a half-percent sales tax and use the money to offset the county's portion of property taxes on owner-occupied homes. This is intended to provide targeted property tax relief in high-cost areas. The Senate Taxation Committee voted 7-0 to advance the bill. Meanwhile, an effort by Senate President Pro Tempore Chris Karr to make a temporary statewide sales tax reduction permanent failed in the Senate.

  • In 2023, lawmakers and then-Gov. Kristi Noem lowered the state's sales tax rate from 4.5% to 4.2%, with the reduction scheduled to expire in 2027.
  • On February 19, 2026, the Senate Taxation Committee voted 7-0 to advance the county sales tax bill.
  • Also on February 19, 2026, the Senate rejected a motion by Karr to reconsider his bill to make the statewide sales tax cut permanent.

The players

Larry Rhoden

Republican governor of South Dakota who proposed the county sales tax plan.

Jim Terwilliger

Budget commissioner for Gov. Rhoden, who testified in favor of the county sales tax bill.

Chris Karr

Republican Senate President Pro Tempore who failed to convince colleagues to make a temporary statewide sales tax reduction permanent.

Nathan Sanderson

Executive Director of the South Dakota Retailers Association, who raised concerns about equity issues with the county sales tax proposal.

Dusty Johnson

U.S. Representative who has proposed capturing revenue from a scheduled statewide sales tax increase to provide property tax credits to homeowners.

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What they’re saying

“It's optional. It's targeted at the areas of the state that need property tax relief the most.”

— Jim Terwilliger, Budget commissioner for Gov. Rhoden

“When a county imposes a sales tax, shoppers from outside the county would pay higher sales taxes without receiving the property tax relief.”

— Nathan Sanderson, Executive Director, South Dakota Retailers Association

What’s next

The county sales tax bill now heads to the full South Dakota Senate for consideration, while the effort to make the statewide sales tax cut permanent has failed.

The takeaway

These tax proposals reflect ongoing debates in South Dakota over how to provide property tax relief, especially in high-cost areas. The outcome could have significant impacts on household budgets and local government revenues across the state.