House fails to override Noem’s veto of optional hotel tax increase

The state House of Representatives failed on Tuesday to override Gov. Kristi Noem’s veto of a bill that would allow hotels and motels in “business improvement districts,” or BIDs, to raise a per-room tax.

Supporters of the bill fell six votes short of the two-thirds majority needed to override the veto. The vote was 41-29, which was four votes fewer than the bill received when the House passed it.

Rep. Mary Fitzgerald, R-Spearfish, spoke against the bill.

“No matter how you slice this, no matter what kind of a pretty box you put it in with a pretty bow, it is still a tax, a tax, a tax,” she said.

BIDs can self-impose a tax and use the revenue for projects, such as tourism promotion or downtown beautification efforts. BIDs that include hotels can currently charge up to $2 per night, per room in extra taxes, beyond regular state and local taxes. That cap hasn’t changed since 2005.

House Bill 1109 would have increased the maximum tax to $4 per night or 4% of the rented room charge. BID districts would have had the option of raising their tax rate, but would not have been required to raise it.

The bill’s prime sponsor in the House, Rep. Becky Drury, R-Rapid City, said “this is about local control” and stressed that increasing the tax would not be mandatory.

“Why are we hamstringing our local entities?” Drury asked. “They do not have to raise it.”

Noem said in her written veto message that tourists would pay some of the higher taxes, but South Dakotans would also be affected.

“We are cutting taxes this legislative session, not increasing them,” Noem tweeted. 

Today, I VETOED a tax increase.

We are cutting taxes this legislative session, not increasing them. pic.twitter.com/jv8JZtFW1b

— Kristi Noem (@KristiNoem) March 2, 2023