City sales tax ends year up but misses projections

Jan. 22, 2026

The first part of the 2025 holiday shopping season seems similar to 2024, at least based on initial sales tax revenue.

Sales tax in the city of Sioux Falls was up 1 percent in December, which represents actual sales in November. Recent years have seen a surge in holiday shopping begin as early as Nov. 1.

“We won’t see the real holiday push until we get to the January numbers,” director of finance Shawn Pritchett said in a report to the City Council.

For the year, city sales tax was up 2.4 percent over 2024, below the city’s 3 percent estimate. Inflation in December was 2.7 percent.

In three of four key sectors measured by the city, “we are seeing improvement,” Pritchett said. “You are seeing some uptick in a few of these key industries for us.”

More consumer-driven sectors such as grocery and department stores are flat or below the rate of inflation. Restaurants are still positive but aren’t seeing as much growth as previous years.

“Home furnishings and electronics, that also continues to struggle,” Pritchett said, noting that remote retail, which had been the city’s strongest growth sector, was essentially flat at the end of the year.

The entertainment tax finished the year down 8.5 percent, though most of it was tied to a one-time adjustment taken early in the year that involved taxes that had been overpaid.

“If that wasn’t in there, we’d pretty much break even for the month of December,” Pritchett said. “As we look at the total year, we came in at just about 1 percent negative.”

That also gives some insight into how the consumer is treating discretionary income, he added, as the entertainment tax largely represents spending on hotels, restaurants and alcohol.

The lodging tax also reported a slight drop for the year.

“We saw softness in occupancy in the hospitality sector, really seeing that consumer pull back a bit,” Pritchett said.

Even an increase in personal income hasn’t necessarily translated to more spending, he continued. That could be a natural lag, or it could be tied to broader issues with consumer sentiment.

Looking forward, “I think we still continue to see a period of uncertainty not just here locally but really nationwide,” Pritchett said.

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