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'Ridiculous' bingo tax was once a serious topic for lawmakers

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

Gov. Kristi Noem took aim at several targets during her recent State of the State address, and she reserved some of her sharpest criticism for a surprising topic.

“Although we don’t have many taxes in South Dakota – we’ve been looking for them – I am going to propose that we eliminate one that is incredibly ridiculous," she said. "Did you know that we have a bingo tax? So this is largely a tax on elderly populations and our veterans. I’m proposing that we get rid of the bingo tax."

Judging by the applause from legislators during the speech and the bill’s reception so far, the bingo tax is doomed. But it wasn’t always viewed as “ridiculous.” Jason Evans alluded to that history while testifying to a state Senate committee. He works for the state Department of Revenue and Regulation.

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

Crackdown leads to legalization

Indeed, bingo was formerly a more lucrative and even controversial industry. It was taxed and regulated to ensure oversight, and to track where the money went.

As one of the first forms of legalized 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 ’30s, bingo events raised money for civic organizations. While playing the game for money was illegal, most authorities looked the other way. Then, in 1969, South Dakota Republican Attorney General Gordon Mydland cracked down on bingo and other illegal gambling. His raids on VFWs and American Legion halls 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 percent support in a statewide election.

That remains the basis for limited bingo gambling today, which only certain groups are allowed to conduct.

“Typically those would be your veterans organizations, your civic, fraternal, educational-type of organizations that can conduct those games," Evans said.

'The Silent Gambling Empire'

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

At the same time, bingo halls opened on reservations – the precursors of tribal casinos.

Bingo became such big business that the Argus Leader newspaper dubbed it "The Silent Gambling Empire.” In 1990, the paper reported the annual gross revenue of just the bingo operations in Sioux Falls was more than $3 million.

Lawmakers took notice. They slapped new regulations and a tax on bingo in 1988.

Those taxes and regulations still exist. Jason Evans says the Revenue Department does not tax the civic groups that run the games, or the players. The tax is on the companies that provide bingo supplies and equipment. Manufacturers have to buy a $2,500 license, and distributors have to buy a $5,000 license and pay a 5 percent tax.

Evans said the cost of those fees and taxes is probably built into the pricing of the products, thus affecting veterans, the elderly and other bingo enthusiasts, as Noem mentioned in her State of the State speech.

'Outlived their usefulness'

Bingo’s popularity has waned over the years as other forms of legal gambling have arisen. A series of South Dakota elections and law changes in the late 1980s authorized state-operated lotto games, video lottery and Deadwood casino gambling. Tribal governments followed suit, replacing bingo halls with casino-hotels. And statewide voters approved Deadwood sports betting in 2020.

Yet Evans said the Revenue Department is still spending a lot of time and energy on a small amount of bingo activity. That’s why he wants to repeal the taxes and fees.

Evans said the department collected $45,000 in license fees and $34,000 in taxes from bingo activity in 1996. By last year, those numbers had declined to about $20,000 in license fees and $12,000 in taxes.

"And so it just seems like with that sharp decline over the years that this tax and license fee have probably outlived their usefulness," Evans said.

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

Seth supervises SDPB's beat reporters and newscast team. He works at SDPB's Black Hills Studio in Rapid City.
Joshua is the business and economics reporter with SDPB News.