PIERRE, S.D.(DRGNews)- A new analysis from the South Dakota Municipal League estimates that if South Dakota voters pass Initiated Measure 28 on the Nov. 5, 2024, general election ballot, cities and towns would lose at least $51.5 million in sales tax revenue each year.

Supporters say IM-28 is an effort to repeal the state’s 4.2% sales tax on groceries, but opponents says the measure’s vague wording could eliminate the tax on “anything sold for human consumption, not including alcoholic beverages or prepared food.”

Municipal League President Harry Weller is the mayor of Kadoka. He says their analysis includes IM-28’s impact on each municipality because if the state can’t tax the items, neither can a city or town.

Aberdeen City Council announced at Monday’s work session that if IM28 passes, the city could lose as much as two million dollars.

Municipal League Executive Director Sara Rankin says the verbiage of the measure conflicts with current South Dakota Codified Law, pointing to the Attorney General’s explanation which notes that, “Judicial or legislative clarification of the measure will be necessary.”

Rankin and Weller say their analysis shows IM-28 would reduce municipal sales tax collections in larger communities like Sioux Falls and Rapid City by more than 8%. They say smaller towns would see losses of over 40%.

The full analysis with city information is available at nosdincometax.com/impact. The estimated loss for each municipality was calculated by first aggregating all of the monthly sales tax reports for communities by SIC code from the Department of Revenue for 2023. Then a percentage was assigned to each SIC code to represent how much of the sales tax revenue generated by businesses under that code comes from consumables. Lastly, those percentages were applied to the 2023 tax data for each community in the state to develop the estimate.