Photo provided courtesy of Pixabay.com
By Jedidiah Price Yuknavich, Staff Writer
In the fall or on a hot summer day you may enjoy a cup of apple cider or lemonade while out on a walk. If you have ever come across a lemonade stand run by a minor, you might know it is illegal to purchase goods or services from someone not possessing a license but purchase drinks regardless. In recent years, there has been a growing trend by local law enforcement in closing down lemonade stands run by minors who fail to obtain proper licensing.[1] South Dakota is joining the trend by passing legislation that will tax minors operating small businesses.[2]
Chapters ten through forty-five of South Dakota’s House Bill 1204, enacted by legislature on March 27, 2019, amended prior law prohibiting minors from selling certain goods and services. [3]Taxation of minors is a highly questioned topic, because some have argued that allowing minors to begin selling goods guides them toward becoming more responsible.[4]Whereas, others argue if minors can sell goods then they must be required to obtain proper licensing.[5] Most small businesses need a combination of licenses and permits from both federal and state agencies in order to operate.[6] The requirements — and fees — vary based on your business activities, location, and government rules. [7] States, such as Utah, have legalized minors providing services and goods just over two years ago, foregoing the occupational license typically required by entrepreneurs and allowing children to run their own small businesses.[8] Utah’s Senate Bill 81 Local Government Licensing Amendments amend existing law requiring occupational licenses and permits for certain businesses, specifically run by minors under the age of eighteen.[9]Different states have different legislation that specify the sale of goods and services.[10] For example, Alabama teens in 2017 mowing lawns for extra cash had been stopped by local authorities for failing to obtain a government license permitting them to earn money. [11]
Similar to Utah’s Senate Bill 81, South Dakota’s House Bill 1204 permits any minor with receipts totaling less than one thousand dollars in a calendar year from sale of personal property, any service delivered, or any product or service for use in the state from being taxed for the sale of those goods and services. [12] This bill allows children in South Dakota to maintain their small business without worrying about paying taxes to the state for their services under one thousand dollars.[13]The bill was sponsored by several representatives and was supported by three senators.[14]
Support for the bill first began in January 2019 following its introduction to the state’s House of Representatives.[15] The state legislature voted seven to six to enact the bill, and it was sent to the House of Representatives.[16]After deferring, the House of Representatives passed Bill 1204 thirty-six votes to thirty- one votes.[17] The bill took some time in the Senate, twice being rescheduled for a hearing and then deferred for some time.[18] The Senate finally passed the bill March 5, 2019, allowing children under eighteen to sell personal property or provide services if they earn less than one-thousand dollars annually.[19] The Governor of South Dakota signed the bill March 27, 2019.[20] Therefore, children were not taxed for entrepreneurship.[21]
The enforcement of occupation licensing differs from state to state. Some states, like Utah and South Dakota, have begun to amend laws that allow minors to sell goods and services. Others, like Alabama have required minors to obtain their business license in order to sell goods or provide services. Ultimately, it is up to legislation to rule if minors are taxed for goods and services.
[1] https://www.cnbc.com/2015/06/19/lemonade-war-3-legal-issues-with-your-kids-small-biz.html
[2] 2019 S.D. HB 1204
[4] https://fee.org/articles/lemonade-stands-legalized-in-utah/
[5] Id.
[6] https://www.sba.gov/business-guide/launch-your-business/apply-licenses-permits
[8] https://fee.org/articles/lemonade-stands-legalized-in-utah/
[9] https://le.utah.gov/~2017/bills/static/SB0081.html
[10] https://fee.org/articles/lemonade-stands-legalized-in-utah/
[12] http://sdlegislature.gov/legislative_session/bills/Bill.aspx?Bill=1204&Session=2019
[13] Id.
[14] Id.
[15] http://sdlegislature.gov/legislative_session/bills/Bill.aspx?Bill=1204&Session=2019
[16] Id.
[17] Id.
[18] Id.
[19] Id.
[20] Id.
[21] Id.
