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Sioux Falls tourism group faces $220K loss amid tax mix-up

September 22, 2018

SIOUX FALLS, S.D. (AP) — A Sioux Falls tourism group is scrambling to cover a $220,000 budget gap from a tax mix-up that went unnoticed for three years.

The South Dakota Department of Revenue recently notified the Sioux Falls Convention and Visitors Bureau that the organization has been receiving more hotel tax revenue than it ought to have since 2015, the Argus Leader reported.

The organization uses taxes collected on hotel stays to lure conventions, trade shows and tourists to the city through advertisements and marketing campaigns. The lodging taxes are sent to the state revenue office, which then funnels the money back to Sioux Falls and the convention bureau.

The revenue department identified that some restaurants were incorrectly filing their monthly tax bills to the state by improperly marking gross sales receipt taxes as lodging taxes. The city refers to gross sales receipt taxes as entertainment taxes.

No red flags were raised because the total amount of the tax returns each restaurant was filing were on par with prior monthly statements, said Doug Schinkel, the department’s business tax division director.

“It’s caused quite a bit of concern here,” said Teri Schmidt, the convention bureau’s director. “It’s really an unfortunate situation because we plan our budget a year out.”

The convention bureau was informed that it had to give back more than $200,000 in April, Schmidt said. The organization had already set its budget for the year, so it had to make up for the oversight.

The group had to scale back on some of its advertising efforts and hiring, according to Schmidt.

Since the revenue department identified the mistake, the state’s electronic filing system has been modified to not allow non-hotels to file lodging taxes. Restaurants have also been informed of proper filing requirements.

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