Ag sales tax exemptions

Megan Luther at the Argus Leader reported the other day that the state will vote to keep tax exemptions for the agricultural industry.

Agriculture is still the only industry in the state that doesn?t pay sales tax on machine parts and maintenance. Others, like construction, pay 4 percent state sales tax and city taxes that could add 2 percent.

The sales tax review committee is charged with evaluating the state?s sales tax exemptions estimated at $527 million.

A legislator still can introduce a bill this coming session to lift the exemption.

In my opinion, this is the kind of vote that tends to make elected officials look out of touch, taxing one industry but not another. It is about time we start treating people fairly across the board. Especially when all sectors are struggling.

Tax exemptions and other loopholes for “special” industries really get under my skin. The problem with government is too many special groups get favors that the rest of us have to subsidize with our own taxes.

41 Replies to “Ag sales tax exemptions”

  1. BF

    Bill Clay, what do you think about the tax exemption on advertising services? I hear it might be up for discussion (again).

    1. Bill Clay Post author

      This link seems to summarize the advertising tax exemption in SD.
      http://www.state.sd.us/drr2/businesstax/publications/taxfacts/advertising.pdf

      An advertising exemption does benefit businesses across the board, however it still would seem to benefit the advertising industry at the expense of others.

      When the government manipulates the tax code to benefit particular groups, it’s always to manipulate behavior or to benefit particular segments.

      Is there a specific point to your comment?

        1. delegate

          It would be nice to know if BF is in favor of the liberal policies of more taxes or if he is in favor of everyone paying more taxes but his business that gets a tax exemption…

          1. Bill Fleming

            It’s not my business that gets the exemption. It’s primarily the media. People who want to advertise currently don’t have to pay sales tax on the advertising space.

            Should a political candidate have to pay sales tax to run an ad in a SD Newspaper, on a Billboard, or on TV or Radio? Should you have to pay sales tax on your want ad to hire a new employee or to sell your old pickup? That’s the real question.

          2. Bill Fleming

            Real simple. Just thinking out loud here.

            Bob makes widgets. He wants to sell you one, so he runs an ad. The cost of that ad gets factored into the price of the widget. If he has to pay tax on his ad, the price of the widget goes up.

            So, point #1: Doesn’t a tax on advertising increase everybody’s cost on the widget at retail?

            Point #2: When you pay sales tax on that widget, isn’t that double dipping? Hasn’t that widget already been taxed?

            Point #3: If Bob’s ad costs go up, he’ll probably advertise less, which means he’ll probably sell fewer widgets. Is any of that progress? Good economic development?

            I’ll let you business guys figure it out.

            Mostly, I just draw the ads.

              1. Bill Clay Post author

                Thank you for your comments. I?m not always at the computer, but I very much appreciate hearing your thoughts. It doesn’t surprise me that the RCJ supports the tax exemption, since you stated earlier the media benefits from keeping it in place.

                I am not one to argue for more taxes, but I do prefer to see taxes distributed equally across the board.

                All sales taxes result in increased costs to business and ultimately to the consumer. Other products and services that are used by businesses are taxed. Everyone would like an exemption. Why should one group get it and not the others?

                The RCJ is a fine paper, but it would make a stronger argument if they were advocating for restructuring the tax code rather than simply for avoiding taxes that affect their business. Obviously they have a stake in this exemption staying in place.

                  1. anon

                    Not paying sales tax on an ad has nothing to do with the first amendment.

                    A paper can print anything it wants.

                    Someone paying sales tax or not on an ad does not affect that paper from doing its business.

                    1. BF

                      The argument is that you are being taxed for exercising your First Amendment Rights. Free speech isn’t free if you have to pay the government for the privelidge of exercising exercise it.

                    2. toad

                      How is paying a tax on an advertisement promoting my business infringing on my first amendment right?

                      You are stretching it big time.

                      Let’s just cut a lot of taxes. Including the income tax.

                  2. BF

                    Toad, not all advertising supports a business. Some make announcements, some make political statements, etc, etc. Right now, the exemption covers them all, who is going to be the one who sorts them all out?

                    1. toad

                      You don’t have to pay anything to put a notice in a paper. At least I never have.

                      If I’m trying to sell a product then perhaps I would. But providing info does not require purchasing and ad.

                    2. toad

                      Good thing we invented the internet then because for hundreds of years we didn’t have that freedom.

  2. Mr. A-Z

    Repealing a tax exemption has the effect of raising a tax on that group of people the exemption was directed toward, thus making it a tax increase. Put forth all the semantics you want, it is what it is.

  3. Springer

    Yes, it’s a tax increase. But just maybe it’s more fair to all who pay taxes. It only institutes a tax on those who have managed to avoid paying taxes before; not quite the same as a tax hike on the people who already pay taxes.

  4. 73*

    I want to know which legislator will have the strength to step forward and oppose this next session. No more exceptions for certain groups.

  5. lrads1

    Megan?s story, if you can call it that, was a very shallow treatment of all that was discussed at the meeting. Good reporting ought to delve into the whys and wherefores, not just the end results. Anyone can hear it for themselves at http://www.sdpb.org/statehouse/archives/2011/interim.asp (discussion of this item starts fairly early the first day) It should make any thinking citizen a little less wanton to throw darts.

    1. 73*

      Megan’s story was very thin and didn’t even differentiate the bill between a house committee or a senate committee but it is wrong to give one group a tax break and not another,

  6. Bill Fleming

    Noticing that Bill Clay seems unresponsive to direct one-on-one interaction. Whaddup widdat? Is he a “my-way-or-the-highway” kinda fella? Or maybe just a drive-by host? LOL. Come on Bill, get up off it!

    1. Anonymous

      No he just doesn’t have the intellectual hp to defend his comments.
      I highly doubt he listened to the hearing and can’t say anything other than “special interest” and “fairness”. He really believes that widget makers should be treated the same as producers of our food and doesn’t even consider what other taxes and amounts ag pays that are highly disproportionate to what the rest of our citizens pay.
      He can’t even explain the ad tax problem correctly. I would hardly say that the lack of an ad tax is beneficial to the ad agency compared to those advertisers who are not paying it. The tax isn’t levied primarily because it’s extremely tough to define what an ad is. Of course there are obvious examples but it’s the little things like business cards, hats, road signs, or anything that has a name or logo on. Florida tried it and eventually had to repeal it since it was such a nightmare.

      1. anon

        If taxes shouldn’t be paid because it is so hard for an industry to pay them without passing the cost on to the consumer maybe there are a lot of other taxes that shouldn’t be paid. As a consumer I am paying for the tax increase on a lot of things when the tax price increases.

        Maybe we should tax people fairly and if it is for business then write it off.

        If not pay the taxes like everyone else or else get rid of the taxes.

  7. Anonymous

    When you talk about “loopholes” for special interests, don’t forget to remember that those who use food stamps have a loophole, as they don’t pay the sales tax on those purchases. Are all loopholes bad, or just the ones we don’t agree with?

  8. part timer

    Remember that the only fair tax is a tax others pay and I do not pay. Equality is the goal…….. When we get equal taxes we will also have a good budget because those in power would lower taxes even more so they did not have to pay…………

  9. Stan Gibilisco

    Whatever exemptions we have (or not), we must always make sure that we avoid double taxation, and maintain a retail sales tax.

    Wholesale transactions should remain exempt in general; sales to or from out-of-state entities should get taxed in the destination state only.

  10. Charlie Hoffman

    Always good to see you have been listening to “RUSH” Bill. The truth will set you free! 🙂

  11. Anonymous

    Oh our business is so complicated and special it would be impossible to collect that tax… What a bunch of bs. Maybe we should all start using that excuse and none of us will have to pay taxes…

    “Representatives of businesses, newspapers and radio and television stations also urged the legislative panel to scrap a proposal to tax advertising services, saying it would be impossible to enforce and would hamper companies’ efforts to find new customers and expand.

    1. Bill Fleming

      Have you read the paper that Mr. Clay linked to above? Does it make sense to you? Did you catch the note that says we in the business have to keep watching for changes in the rules and be sure to keep up to date?

      That’s precisely because it IS complicated. The statute says “advertising services” are exempt (and that’s ALL it says.) If you think it’s so simple, let’s see how you would define them. Here’s the link again in case you missed it:

      http://www.state.sd.us/drr2/businesstax/publications/taxfacts/advertising.pdf

  12. Charlie Hoffman

    Bill sorry about the delay in getting back to you. I have been busy elsewhere. A bit of a snarky comment on using Rush’s “Drive By Media (Host)” remark here on the War College. We already have broken the golden rule of taxation in SD by allowing the double taxation of sales taxes paid on product used in building projects with an all encompassing excise tax. Maybe we can fix that this coming session. 🙂

  13. Bill Fleming

    Oh, okay. Now I get it. Thanks Charlie. I didn’t realize the “drive by” thing was Rush. Funny! I picked up a Limbaugh bug. Heaven help me. LOL.