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Gov. Daugaard Vetoes SB 136





            Office of Gov. Dennis Daugaard

500 E. Capitol Ave.

Pierre, S.D. 57501

605-773-3212

www.sd.gov

 

 

 

 

FOR IMMEDIATE RELEASE:  Friday, March 20, 2015

CONTACT:  Tony Venhuizen or Kelsey Pritchard at 605-773-3212

                                   

 

Gov. Daugaard Vetoes SB 136

 

PIERRE, S.D. – Gov. Dennis Daugaard has vetoed the following bill:

                    

SB 136 – An Act to exclude certain municipal taxes from the gross receipts used to determine the tax liability for customers served by electric cooperatives and electric utilities.

 

For more information about this bill and other bills, visit legis.state.sd.us.  

 

 

                                                            -30-

 

 

Note: A copy of the Governor’s veto message follows:

 

March 20, 2015

 

The Honorable Matt Michels
President of the Senate
500 East Capitol Avenue
Pierre, SD 57501-5070

 

Dear Mr. President and Members of the Senate:

 

I respectfully return to you Senate Bill 136 with my VETO.

 

Senate Bill 136 is entitled, "An Act to exclude certain municipal taxes from the gross receipts used to determine the tax liability for customers served by electric cooperatives and electric utilities."

 

I do not accept the argument that the current taxation system imposes a double tax.  Rural electric companies are in a similar situation to thousands of businesses throughout South Dakota.

 

Consider a barbershop.  After giving a haircut, the barber collects state and municipal sales tax on the entire fee.  That fee is not pure profit.  The barber uses that income to cover all business expenses, including real property taxes on an owned building.

 

Whether it is a barbershop, grocery store, clothing store, or law practice – any business includes its business expenses, including property taxes, in the prices it charges.  All of these businesses collect sales and use tax on the entire purchase price.  In fact, SDCL 10-45-1.14(2) specifically states that businesses may not deduct “taxes imposed on the retailer” when calculating sales tax.

 

Rural electric companies are in exactly the same situation as those other businesses. The only difference is that property taxes are assessed on rural electric companies in a different way.  Rather than paying a property tax on poles, lines and other fixed assets, they pay a gross receipts tax “in lieu of property tax” based on retail and wholesale electric energy.  If a rural electric company’s territory includes an area within a municipality, the company may make a similar payment to the municipality.

 

Senate Bill 136 would create a special exemption for rural electric companies that no other South Dakota business is given.  It would allow a rural electric company to deduct its payment in lieu of property taxes from its gross receipts before paying state and municipal sales tax.

 

Creating this special dispensation is contrary to the broad based sales tax principles that are the foundation of South Dakota’s sales tax, the primary source of state government funds, and could easily lead to other businesses requesting similar exemptions in future years.

 

South Dakota should not create a special tax calculation rule for rural electric companies that no other South Dakota business is given.  I oppose this bill and I ask that you sustain my veto. 

 

Respectfully submitted,

 

 

 

Dennis Daugaard

Governor

 

cc:     The Honorable Dean Wink
          The Honorable Shantel Krebs