Gov. Noem Announces Bill to Eliminate Sales Tax on Groceries

PIERRE, S.D. – Today, Governor Kristi Noem, Representative Mary Fitzgerald, and Senator John Wiik announced HB 1075, which will deliver the largest tax cut in South Dakota history by eliminating the sales tax on groceries. This proposal would put $102 million back in the pockets of South Dakotans.

“I’ve visited dozens of grocery stores across South Dakota in recent months, and every time, I meet South Dakotans who are shocked by the rising cost of food,” said Governor Kristi Noem. “They need relief – and we can afford to give it to them.”

In the last 2 years, the Consumer Price Index for “food at home” has risen 19%. This tax cut will counter that inflation in a direct and transparent way – consumers will see the impact on their receipt every time they go to the grocery store.

“Eliminating this tax will make it easier for South Dakota families to make ends meet, including my own kids and grandkids,” said Rep. Mary Fitzgerald. “As a former appropriator, I am confident that our state budget can afford this while still planning conservatively and responsibly for the future.”

A majority of states have cut major tax rates since January 1, 2021. South Dakota is an outlier as one of only 3 states that fully tax food.

“We hear a lot from special interest groups in the Capitol every year, but it’s time that we lobby on behalf of the taxpayer,” said Sen. John Wiik. “As we continue to shatter our state’s revenue records, legislators must ask ourselves, ‘how much is enough before we finally give it back to the people?’”

So far this fiscal year, ongoing general fund collections are up $146 million above the legislative adopted level. Governor Noem’s budget projects that this number will increase to $203 million by the end of Fiscal Year 2023, and her budget projects an additional $33 million in ongoing revenue growth in Fiscal Year 2024. With an additional $75 million in ongoing revenue available for last fiscal year, the state will still see $208 million in ongoing revenue even after this tax cut.

“Even with conservative projections for future revenue growth, we can afford this tax cut,” said Jim Terwilliger, Commissioner of the Bureau of Finance and Management. “The Governor has consistently provided large funding increases to schools, medical providers, state employees, and other groups. This proposal adds a group that is too often ignored – South Dakota taxpayers.”

The bill was introduced with 10 cosponsors, including 6 in the House and 4 in the Senate. The tax cut will not impact sales taxes collected by cities.

Governor Noem discussed eliminating the grocery tax in her State of the State Address; you can find those remarks here.