Despite rising inflation and a volatile economy, Mitchell sees strong growth in sales tax revenue

Nov. 25 – MITCHELL – Mitchell’s economy has managed to remain strong this year amid rising inflation and mounting recession concerns.

Throughout the year, Mitchell saw significant growth in sales tax collections each month. The increase in sales tax on first and second pennies has Mitchell on track to surpass last year’s revenue, which totaled $6.1 million.

At the end of October, first and second cent sales tax collections were $5.56 million, up about $500,000 from the same period in 2021. Sales tax for November and December has yet to be counted. Given that this is historically two of the busiest shopping months of the season, chances are the city will surpass last year’s total tax revenue and post another year of tax growth.

Though local sales tax hikes are confusing as inflation has soared as much as 9.1% this year, a jump not seen since 1981, City Administrator Stephanie Ellwein said the city’s ability to remove the tax for Elevating sellers was crucial to Mitchell.

“If you look nationally, the average sales tax increase over the last 10 years was 4.1%, but we’re at 2.5%. We’re seeing slower growth than other top-tier communities, but what’s really helped to see more growth is the internet sales tax,” Ellwein said, noting that it generates about $60,000 a month. “Without that, we would probably not seeing the growth we saw last year and this year.”

According to Ellwein, the city took just over $714,000 from internet sales tax in 2021, its second full year of existence. The city began collecting the distance seller tax in late 2019 after the landmark U.S. Supreme Court decision known as South Dakota v. Wayfair gave the state the ability to collect online sales from internet-based businesses that did not have a physical presence in South have dakota .

Depending on where an online purchase is made, sales tax is returned to the state and local communities, just like a purchase from a brick-and-mortar store.

The story goes on

While Mitchell has managed to report sales tax growth this year, inflation has minimized the increase in revenue. The cost of some city projects has tripled and quadrupled compared to original estimates from previous years, such as For example, the Northern Wastewater Treatment Plant project, which was initially valued at around $3 million two years ago, has increased to $16 million this year.

Maintaining a high sales tax is critical to the city as it is the largest source of revenue to fund city services. According to Ellwein, sales tax revenue accounts for 57% of the city’s total revenue.

“If sales tax drops significantly, that has a major impact on the annual budget,” said Ellwein.

Mitchell Mayor Bob Everson has concerns that sales tax revenues could take a hit if Gov. Kristi Noem’s proposed food tax cut goes through. Noem’s grocery tax cut would aim to eliminate the state’s 4.5% sales tax on groceries.

According to Everson, the food tax cut could result in a loss of about $900,000 if lawmakers pass it in the near future.

“That’s a significant amount of money that would hit the city,” Everson said.

Dist. 20 Rep. Lance Koth said during an October meeting at the Mitchell Chamber of Commerce that the currently proposed food tax cut would not stop municipalities from collecting their percentage of the tax.

Though Mitchell has lost a handful of restaurants and a large hotel over the past two years, the third-penny tax, also known as the entertainment tax, which derives from taxes on lodging, prepared food, entertainment ticket sales and alcohol sales, has seen steady growth . In October, the city’s entertainment tax revenue was just over $804,000, an increase of about $40,000 from the same period in 2021.

Mitchell’s entertainment tax is largely driven by the Corn Palace, which attracts hundreds of thousands of visitors and hosts major events each year. While visitor numbers at Mitchell’s top tourist attraction have declined throughout the tourist season this year, Corn Palace director Doug Greenway said bus tours have been strong. And buses usually mean a boost for local gastronomy.

“When buses come, people often have lunch in our restaurants. Last year we had a historic tourism season, but visitor numbers have been fairly consistent this year,” Greenway said.