Armed with a 66-year-old law, the South Dakota state revenue department is pushing churches to pay taxes on candles, Bibles, song books and other liturgical items purchased outside South Dakota.
The crackdown, which was announced to churches earlier this month in a letter from the South Dakota Department of Revenue and Regulation, has alarmed church leaders who see the collection effort as a threat to their independence.
At issue is whether churches are exempt from the payment of use taxes on items such as candles, sacramental wine, bread and prayer and song books. When those items are bought out of state, the department of revenue says, a use tax must be paid. The letter orders the churches to obtain a tax license.
And if a church is found to owe back taxes, the state wants to collect the amount owed from the past three years. Penalties and interest would be waived.While an individual church may owe a few hundred dollars or less, when added together, the revenue from the more than 2,000 churches in the state adds up.
KNWC, a Christian radio station with an affiliate in Sioux Falls, also has been affected by the use tax. Effective last February, the Department of Revenue and Regulation changed KNWC's state from exempt to nonexempt, and the radio station now will pay about $24,000 in sales and use tax on concerts each year. A sales tax will be put on tickets.
In e-mail exchanges with a Department of Revenue and Regulation agent, the Rev. Chris Franklin of First Christian Church was told the state would require licenses for all congregations. In addition, he was told that churches should keep records for the past three years and church boards accept the responsibility for accuracy in tax payments.
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