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David Bordewyk (foreground), General Manager of the South Dakota Newspaper Association, successfully fought a measure that would have taxed advertising in South Dakota. The bill was killed 10-4 in House Taxation Committee on Jan. 24. PIERRE (CNS)-A proposal to extend sales tax on advertising was defeated by the House Taxation Committee, 10-4, on Jan. 24.

The bill, House Bill 1243, was designed to broaden advertisements that would be taxed in an effort to decrease food taxes.

Rep. Mary Glenski, D-Sioux Falls, carried the bill with intentions of transferring the money from the sales tax of advertisements to the food tax relief.

The bill would have decrease sales tax on foods. Dietary supplements, soft drinks and candy would not receive the exemption.

A 1-percent decrease in sales tax on food, from 4 percent to 3 percent, would be beneficial to low-income families and increasing sales taxes on advertisements would be the way to do this, Glenski said. Other states have considered imposing taxes, but have never imposed the tax, said David Bordewyk, general manager of the South Dakota Newspaper Association.

Bordewyk said 40 states have considered this option and three states have repealed taxes on advertising.

“It hasn't worked in the past,” Ron Olinger of the South Dakota Retailers Association said.

Florida, Iowa and Arizona have all repealed taxes on advertising. The Florida Legislature went into emergency session six months after the advertising tax was implemented to repeal the tax in 1987. No states currently tax these types of advertising.

He said that the tax would harm the economy in the state.

“An advertising tax would hurt South Dakota's economy. Businesses use advertising to promote and sell their products and services. Imposing a new tax on South Dakota businesses would result in less promotion, less sales, less sales tax revenue for state and local governments,” Bordewyk said.

Bordewyk noted a recent study which found that advertising impacted $7 billion in sales in South Dakota.

The tax brings additional concern for small local businesses.

“This would impact a lot of our small retailers. Our retailers who are trying to establish a niche through advertising,” Olinger said.

Bordewyk agreed, citing advertising as the only way small businesses can compete with larger companies. The cost of this tax would be expensive for small businesses to continue to advertise and would weaken their ability compete, he said.

Defining what qualifies as advertising was also an issue.

“If you look around, everything you see you could literally interpret as advertising,” President of the South Dakota Broadcasters Association Steve Willard said.

According to Bordewyk, defining advertising is an impossible tax because of the many different interpretations.

Glenski said this bill would be a broadening of an existing tax.

“It's not really a new tax. It's really a fairness issue that says if we're going to tax adverting because a printer is printing it, we should tax those [advertisements] that have not already been taxed,” said Glenski.

The bill would tax only those businesses in South Dakota who advertise in the state. All regional and national broadcast advertisements would be exempt from the tax unless an establishment exists in the state. This would also exempt all national political advertising.

Supporters of the bill say the focus should be on the low-income families this would benefit.

“It places a smaller burden on those who can least afford to be taxed and a greater responsibility on those who can afford to invest on building a better infrastructure for their goods and services,” Norma Wilson of the South Dakota Peace and Justice System said.

Wilson said the bill offers a reduction in sales tax and a means to replace this revenue.

She said, “While we feel that the food tax should be eliminated entirely since it hits people in poverty the hardest, we understand the necessity of taxation and we see this as a positive step in the right direction.”

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