Michael Houdyshell, left, secretary of the South Dakota Department of Revenue, testifies to the Legislature’s Senate Taxation Committee on Feb. 6, 2026, at the Capitol in Pierre. (Photo by Seth Tupper/South Dakota Searchlight)
State lawmakers on a budget committee endorsed a bill Friday at the Capitol in Pierre that would keep South Dakota’s sales tax at its reduced rate.Â
Shortly after, another committee rejected a rival bill that would have used an increased sales tax rate to lessen property taxes across the state, and advanced a bill that would ask voters to legalize mobile sports betting and capture tax revenue from that to reduce property taxes.
The decisions illustrate competing ideas on how to address property tax relief in South Dakota — there are dozens of bills filed on the topic — and are repeats of conversations from the past several years.
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Legislators considered rival tax relief programs in 2023, including a Senate-backed statewide property tax rebate program and a House-backed decrease in the state sales tax rate of 4.5% to 4.2%. Both had a price tag of roughly $100 million. The Legislature at the time adopted the sales tax rate reduction with a three-year sunset clause that’s scheduled to raise the rate back to 4.5% next year.
This is the third year since the tax cut that Senate President Pro Tempore Chris Karr, R-Sioux Falls, has tried to repeal the expiration date and make the sales tax reduction permanent, failing in 2024 and 2025. Karr said the permanent sales tax cut is the fairest way to provide relief, since it wouldn’t divert sales tax dollars — paid by renters, tourists and others who may not own property — toward property tax credits.
During Friday’s Senate Appropriations discussion on the permanent sales tax relief bill, Sen. Ernie Otten, R-Tea, called attempts to use sales taxes for property tax relief “bad tax policy.” Karr’s bill passed with a 6-3 vote, after facing opposition from the South Dakota Retailers Association, the South Dakota Farm Bureau and the Greater Sioux Falls Chamber of Commerce.
During Friday’s Senate Taxation Committee meeting, Sen. Amber Hulse, R-Hot Springs, said lawmakers in 2023 “made a poor choice in how they gave tax relief” while discussing a new bill from Madison Republican Sen. Casey Crabtree that would capture revenue from the scheduled sales tax increase to reduce property taxes. Crabtree’s bill was rejected with a 4-3 vote, after facing opposition from the state Bureau of Finance and Management and Department of Revenue.
The Senate Taxation Committee advanced two other bills addressing property taxes.
Sen. Randy Deibert, R-Spearfish, introduced Senate Bill 125, which would establish a “homeowner tax reduction fund” at the state level, without specifying a revenue or funding source. That passed out of committee unanimously.
Crabtree’s proposal was one option to fill that proposed fund. Deibert said the fund created in SB 125 could be filled in other ways.
The second bill to make it out of the Senate Taxation Committee was Senate Joint Resolution 504, also introduced by Crabtree. The resolution, if passed, would ask South Dakota voters in the November general election to approve a constitutional amendment legalizing mobile sports betting statewide, with most of the tax revenue used to lower property taxes across the state.Â
Voters amended the state constitution in 2020 to legalize sports betting only in Deadwood and tribal casinos in South Dakota. It is legal statewide in Wyoming and Iowa, among other states, and sports-betting smartphone apps and websites have proliferated nationwide.
John Pappas, representing fraud prevention and cybersecurity firm GeoComply, shared with lawmakers that the company recorded 1.6 million attempts to place mobile sports bets in South Dakota in 2025, which came from 55,000 sports wagering accounts. Nearly 7,000 South Dakotans physically crossed the Iowa and Wyoming borders since September 2025 to place bets.
“Iowa is benefitting from the current status quo in South Dakota,” Pappas said.
The bill advanced 4-3 but faced criticism for funding property tax relief with a potentially addictive enterprise.
Sen. Amber Hulse, R-Hot Springs, shared with lawmakers that her father is “a gambling addict.” She saw the constitutional amendment as a way to set up safety measures and guardrails, such as easier access to an addiction hotline and betting caps. Funding property taxes through the new revenue source would be an added benefit, she said.
“Anywhere we can find revenue sources, like a sin tax, essentially, to put toward a growing problem in our state, I’m personally in favor of,” Hulse said.
