The ‘ridiculous’ bingo tax was once a serious topic for lawmakers

This segment is from SDPB’s monthly news program, Focus on South Dakota.

Gov. Kristi Noem hit multiple targets during her recent state of the state address, and she reserved some of her harshest criticism for one surprising topic.

“Although we don’t have a lot of taxes in South Dakota – we were looking for them – I’m going to suggest that we remove one that is incredibly ridiculous,” she said. “Did you know that we have a bingo tax? So a lot of it is a tax on older people and our veterans. I suggest we get rid of the bingo tax.”

Judging by the applause from lawmakers during the speech and the reception of the bill so far, the bingo tax is doomed. But it wasn’t always considered “ridiculous”. Jason Evans alluded to this story during his testimony before a state Senate committee. He works for the state Department of Revenue and Regulation.

“I imagine in the 1970s and 1980s bingo was all the rage,” Evans said, “and there was probably a legitimate regulatory purpose for those license fees and taxes.”

Repression leads to legalization

Indeed, bingo was once a more lucrative and even controversial industry. It was taxed and regulated to provide oversight and to track where the money was going.

As one of the first legalized forms of gambling in the state, bingo paved the way for the billions wagered today on lotto games, video lottery, casino games and sporting events.

Beginning in the 1920s and 1930s, bingo events raised funds for civic organizations. While gambling for money was illegal, most authorities turned a blind eye. Then, in 1969, Republican South Dakota Attorney General Gordon Mydland cracked down on bingo and other illegal gambling. His raids on the VFWs and halls of the American Legion were not popular.

The legislature responded with a new law in 1970 to legalize limited bingo games, raffles, and lotteries for certain public-spirited organizations. Voters agreed, approving the measure with 59% support in a statewide election.

This remains the basis of limited bingo games today, which only certain groups are allowed to hold.

“Typically, your veterans organizations, civic, fraternal and educational organizations can host these games,” Evans said.

“The Silent Game Empire”

Eventually, other groups figured out how to get a piece of the bingo pie. In the 1980s, bingo halls were created and entrepreneurs rented them out to rotating lists of civic groups. While bingo was organized for the benefit of approved bodies, some of the money went to the private owners of the halls.

At the same time, bingo halls opened by reservation, precursors of tribal casinos.

Bingo has become such a big business that the Argus Leader newspaper has dubbed it “The Silent Gambling Empire”. In 1990, the newspaper reported that annual gross revenue from bingo operations in Sioux Falls alone was over $3 million.

Lawmakers have taken notice. They imposed new regulations and a bingo tax in 1988.

These taxes and regulations still exist. Jason Evans says the Department of Revenue does not tax the civic groups that run the games, nor the players. The tax applies to businesses that provide bingo supplies and equipment. Manufacturers must purchase a license for $2,500 and distributors must purchase a license for $5,000 and pay a 5% tax.

Evans said the cost of these fees and taxes are likely baked into the price of the products, affecting veterans, seniors and other bingo enthusiasts, as Noem mentioned in his state of the art address. ‘State.

“Outlived their usefulness”

Bingo’s popularity has declined over the years as other forms of legal gambling have emerged. A series of South Dakota elections and legislative changes in the late 1980s allowed state-run lotto games, video lottery, and Deadwood casino games. Tribal governments followed suit, replacing bingo halls with hotel-casinos. And voters across the state approved Deadwood’s sports betting in 2020.

Still, Evans said the revenue department still spends a lot of time and energy on a small amount of bingo activity. That is why he wants to repeal taxes and fees.

Evans said the department collected $45,000 in licensing fees and $34,000 in taxes from bingo activities in 1996. Last year, those figures had dropped to about $20,000 in licensing fees and $12,000 $ in taxes.

“And so it looks like with this big drop over the years, that tax and license fee has probably lost its usefulness,” Evans said.

The state Senate has already passed the Noem administration’s bill to repeal the bingo tax and license fee. The legislation is pending in the House of Representatives. Manufacturers and distributors of bingo will still have to pay any applicable sales tax on their operations.