Industry seeks expansion of tourism tax

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Industry seeks expansion of tourism tax

RAPID CITY, S.D. - Expanding the state's tourism tax would provide extra funding for travel promotion and give South Dakota an edge in competing against other states, supporters say.

The tourism industry wants to enlarge the tax to include restaurant meals, a move that could generate $3 million to $5 million a year.

"Most of the money raised by this tax would be new money, new marketing, because there wouldn't be a lot of overhead and administration," said Stan Anderson, part owner of Elkton House Restaurant in Wall and a partner in Gold Dust Gaming in Deadwood. "For every dollar spent on marketing, they say that's $14 you can get back in new revenue. That's a pretty nice return."

Skeptics say that with the state Legislature facing a potential budget shortfall of more than $50 million, it will be difficult to sell an expansion of any tax.

The addition would be a burden on South Dakota residents more than tourists, said Democratic Senate leader Garry Moore of Yankton.

"It is the citizens of the state who will pay this year-round," Moore said. "The tourists come and go. We're here all year. And that will be a significant impact."

The state already has a 1 percent tourism tax on sales at businesses that deal with tourism. Passed in 1996, the tax applies to lodging, camping, certain spectator events, tourist attractions and recreational services such as snowmobile rentals and hunting and fishing guide and charter services.

It generated about $3.7 million during the state fiscal year that ended last June.

Anderson, president of the Visitor Industry Alliance, said much of the opposition to the plan has been defused by exempting some food outlets.

Small restaurants and cafes with fewer than 50 seats, as well as local food-service institutions such as American Legion clubs and country clubs would not be part of the tax.

"The draft was structured to leave out some of the people who might be opposed to it. But there is also the feeling that if we do it, it should include everybody," Anderson said.

He also thinks part of plan's appeal is that half the money raised would return to the region of the state where it was raised.

"I think that will sell really well," he said. "If the northeast does really well, half of that comes back there for promotion there."

The South Dakota Tourism Department currently relies on the tourism tax and a portion of Deadwood gaming proceeds, about $1.6 million a year, for its budget.

While those funding sources provide more financial stability, they don't allow the state to expand its marketing, said Jim McKeon, president and CEO of the Rapid City Area Chamber of Commerce.

"We've had enough money to reach the same markets we've reached for a long time," McKeon said. "It's a market that has been producing very well for us, don't get me wrong. But there's so much more out there, especially when you consider the product we have to sell."

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