LICENSING REQUIREMENTS CHANGED
August 2, 2005

A recent communication from the Department of Revenue informed us that churches would not be required to apply for a business tax license.  This is welcome news.  Our concerns about this tax collection procedure have been heard and responded to.  In addition, the Department is not asking churches to review or pay tax on any past purchases (prior to July 1, 2005).  We will be asked to pay sales and use taxes from here on out, however. 

The tax liability for most churches shouldn't be very large. Augsburg, the Lutheran publishing company, and Cokesbury, connected to the United Methodist Church, for instance, build the SD sales tax into their charges.  Upon receipt of a catalogue in the mail for church furniture the company was called and asked if they figure in SD sales tax.  They said they do, unless an exemption number is mailed in with the order.  Many businesses, particularly larger ones, are likely to do the same.

The Department of Revenue said that they will send out a questionnaire and a reporting form next June, at which time the churches will be required to submit any taxes owed.  If there are not services or goods purchased for which the tax should be paid, there will be no tax liability.

There are two concerns:
 
     1) Record keeping should start now, so that a crisis isn't created next June, when the questionnaire and order form come in.  It should be as simple as making a copy of any goods or services that is purchased without payment of a sales tax.  If South Dakota has a sales tax on something, and a church doesn't pay that sales tax at the time of purchase, a copy of the receipt should go into a file.  At the end of the year all of the information should be in one file.  If the church is larger, purchases a lot out of state, or has a more complex accounting system, it may be more complicated, of course.

     2) Churches should only have to keep track of relevant purchases.  They should not have to develop an accounting system that will cost more than the taxes that they have to pay.  The leaders of the church should not be intimidated by concerns that mistakes in purchasing procedures could put them at financial risk.

Many people have expressed surprise that churches have to pay sales taxes at all, and they don't think it's right.  Few know what use taxes are, unless a tax bill has caught them after some out of state purchases.  There are problems with the use tax, particularly concerning the State's ability to uniformly collect it, but that hasn't been the focus of our concerns.  We've consistently stated that we have the responsibility to follow the law, and our sales tax applies to Churches and other non-profits, with certain exceptions as outlined in the law, so we are obligated to follow the law or change it.