Chamberlain SD Sales Tax:
What Businesses Must Know

Sales tax range in South Dakota

In 2024, South Dakota's state sales tax rate remains consistent at 4.5%, the same as in 2023. If you're curious about what is the sales tax in South Dakota, keep in mind that local jurisdictions can impose additional sales taxes, which means the total sales tax rate can vary depending on the locality.

In Sioux Falls, SD, the sales tax rate is a combination of state and local taxes, equating to 6.5% in total. This rate includes the South Dakota state tax rate of 4.5% and an additional local tax rate of 2%, which has remained consistent from 2023 to 2024. This consistency allows for easier financial planning for both consumers and businesses.

When considering sales tax in Sioux Falls, SD, it's important to note that Sioux Falls imposes an additional local rate on top of the state rate. In 2023, the total sales tax rate in Sioux Falls is 6.5%, combining the state rate of 4.5% with a local rate of 2%. This local rate remains unchanged in 2024, ensuring that any purchases made in Sioux Falls are subject to a consistent total sales tax rate.

State Sales Tax: The state of South Dakota maintains a uniform sales tax rate of 4.5% in both 2023 and 2024.

It's key for anyone shopping or doing business in Sioux Falls, SD, to be aware of the local sales tax rate. The combined sales tax in Sioux Falls is 6.5%, reflecting a 4.5% state tax and a 2% local tax. This rate ensures that Sioux Falls maintains a balanced approach to taxation, supporting both city and state services.

Local Sales Tax: Local municipalities and counties have the authority to levy additional sales taxes, which generally range from 0.5% to 2%. The combined sales tax rate can therefore range from 4.5% to 6.5%, depending on the locale. These rates remain stable from 2023 to 2024.

County-Specific Rates: Many counties apply an additional tax; for example, Pennington County continues with a 0.5% rate, and Minnehaha County maintains an extra 1% in 2024, consistent with 2023 rates.

City-Specific Rates: Cities like Sioux Falls impose a higher local rate, known as the sales tax in Sioux Falls, SD. In 2023, the total sales tax rate in Sioux Falls was 6.5%, and it remains so in 2024, combining the state rate of 4.5% with a local rate of 2%.

When considering sales tax in Sioux Falls, SD, it's important to note that Sioux Falls imposes an additional local rate on top of the state rate. In 2023, the total sales tax rate in Sioux Falls is 6.5%, combining the state rate of 4.5% with a local rate of 2%. This local rate remains unchanged in 2024, ensuring that any purchases made in Sioux Falls are subject to a consistent total sales tax rate.

Special Tax Districts: Certain special tax districts within the state may impose supplemental taxes to fund specific projects or services, impacting both retail and consumer sectors. In these areas, the total rate can exceed the typical maximum of 6.5%. For instance, designated tourist areas might have marginally higher total sales tax rates. These special rates also did not undergo changes from 2023 to 2024.

Calculating South Dakota sales tax

Determine South Dakota State Sales Tax Rate: South Dakota state sales tax rate: 4.2%.

Identify Local Sales Tax Rates: Local tax rates vary by city and county. Check the specific local tax rate for the relevant city or county.

Calculate Total Sales Tax Rate: Add the state sales tax rate to the local tax rate. Example: If local tax is 2%, total sales tax rate is 4.2% + 2% = 6.2%.

E-commerce Sales Tax: Does South Dakota have sales tax requirements for remote sellers and marketplace providers? Yes, they must collect state sales tax if exceeding $100,000 in sales or 200 transactions. Apply both state and local sales tax rates.

Sales Tax for SaaS (Software as a Service): SaaS is subject to sales tax in South Dakota. Apply the total state and local sales tax rates.

Sales Tax for Services: Services are generally subject to sales tax unless specifically exempt. Check if the specific service is exempt from tax.

Calculate Tax Amount: Multiply the total sales tax rate by the sale amount. Example: For a $100 sale at a 6.2% rate, tax amount = $100 * 0.062 = $6.20.

Collect and Remit Taxes: Collect the calculated sales tax at the point of sale. Remit collected taxes to the South Dakota Department of Revenue.

Maintain Records: Keep detailed records of sales and taxes collected. Required for remittance and potential audits.

Recent changes to South Dakota sales tax

In 2024, South Dakota implemented several changes to its sales tax regulations. These changes reflect adjustments in tax rates, exemptions, and clarifications on taxable goods and services compared to 2023.

Tax Rate Adjustment: As of January 1, 2024, the state sales tax rate was reduced from 4.5% to 4.2%. This reduction aims to alleviate some of the tax burdens on residents and encourage consumer spending. In 2023, the rate was consistently set at 4.5%.

Remote Seller Tax Threshold: Effective March 1, 2024, the economic nexus threshold for remote sellers was revised. In 2023, remote sellers with over $100,000 in sales or 200 transactions in South Dakota were required to collect and remit sales tax. The 2024 adjustment raised the sales threshold to $200,000 while removing the transaction threshold.

Exemptions and Expansions: Several changes to exemptions were enacted starting July 1, 2024. Groceries and essential household items such as diapers and feminine hygiene products were exempt from sales tax. Previously, in 2023, these items were taxed at the standard rate. Additionally, exemptions on agricultural equipment were broadened to include more types of machinery and technology.

Streamlined Definitions: On October 1, 2024, the state updated its definitions for digital goods and services to clarify taxable items. This effort was to align with modern consumption patterns and ensure equitable tax application. In 2023, definitions were less specific, leading to inconsistencies in tax collection on digital products.

Understanding origin vs. destination sales tax collection

South Dakota is a destination-based sales tax state. This means that sales tax is collected based on the location where the purchaser receives the product or service. The tax rate applied is determined by the destination of the sale rather than the origin or shipping location.

For further details on South Dakota's tax collection requirements, you can visit the South Dakota Department of Revenue's official website. They provide comprehensive guidelines and resources on how to comply with the state's tax laws: https://dor.sd.gov/.

Taxable products in South Dakota

In South Dakota, the state imposes a sales tax on a wide range of products and services. As of 2024, here's an overview of the general categories of products that are subject to sales tax:

Tangible Personal Property

General Merchandise: Almost all physical goods, including electronics, furniture, clothing, and toys.

Food and Beverages: This includes both prepared food (such as restaurant meals) and groceries, though some items may be exempt.

Vehicles: Sales of cars, trucks, motorcycles, and other vehicles.

Tools and Equipment: Items for personal and professional use.

Services

Labor: Certain types of labor services, for instance, repair and installation services.

Telecommunications: This includes telephone, cable, and internet services.

Utilities: Electricity, gas, heating, and water services.

Digital Goods

Digital Products: This includes downloads or streaming of movies, music, e-books, and other digital content.

Software: Both pre-packaged and custom software solutions.

Leases and Rentals

Charges for the lease or rental of tangible personal property.

Admissions and Entertainment

Event Tickets: Admission to events like concerts, sports, and movies.

Membership Fees: Fees for clubs or organizations that provide facilities for recreation or entertainment.

Lodging

Charges for hotel, motel, and short-term lodging accommodations.

Is SaaS taxable in South Dakota?

In South Dakota, Software as a Service (SaaS) is considered taxable.

The state includes electronically delivered or accessed software within its sales tax jurisdiction, meaning companies that provide SaaS must collect and remit sales tax on these transactions. This policy aligns with South Dakota's broader approach to digital products and services.

Are digital products taxable in South Dakota?

In South Dakota, digital products are taxable as of 2024.

This includes digitally-delivered goods such as music, movies, books, software, and other intangible products. Consumers purchasing these digital items will be subject to the state's sales tax applicable to tangible personal property.

Are services taxable in South Dakota?

In South Dakota, most services are subject to sales tax.

This includes a wide range of services such as repair, maintenance, and personal services. The state relies on this taxation to support its budget as it does not have a personal income tax, thus broadening its tax base through service taxation.

Physical nexus

In 2024, physical nexus criteria for sales tax in South Dakota have minor changes compared to 2023. The criteria focus on maintaining a presence in the state, warranting sales tax obligations.

Retailers

Retailers with a physical location such as a store or office must collect and remit sales tax. 2024: No significant change from 2023. Physical presence mandates the same tax obligations.

Employees

Employees or representatives working in South Dakota create a nexus for their employers. 2024: The threshold remains unchanged from 2023, requiring sales tax collection if employees or agents operate within the state.

Owning or Leasing Property

Owning or leasing property, including inventory storage, constitutes a nexus. 2024: This requirement is consistent with 2023 regulations. Leasing or renting property continues to require tax compliance.

Deliveries

Delivering merchandise using company vehicles establishes a physical presence. 2024: Similar to 2023, delivery vehicles within state boundaries imply the need for sales tax collection.

Trade Shows

Attendance at trade shows or exhibitions can establish a temporary physical nexus. 2024: The temporary nexus rule aligns with 2023 conditions, mandating tax adherence for activities like trade shows.

Affiliated Entities

Affiliated entities sharing a close relationship may be required to collect sales tax based on physical presence. 2024: Definitions and rules for affiliates follow 2023 guidelines without major alterations.

Economic nexus

In 2024, South Dakota's economic nexus for sales tax remains a critical compliance point for out-of-state sellers. The state continues to activate economic nexus provisions set forth by the South Dakota v. Wayfair, Inc. decision.

Economic nexus threshold

In 2024, businesses with over $100,000 in sales or 200 transactions within South Dakota must collect and remit sales tax. This threshold has not changed from 2023, ensuring consistency for businesses managing remote sales.

Changes in compliance and enforcement

In 2024, South Dakota has increased efforts in digital compliance tools, making it more straightforward for businesses to report sales tax obligations. In 2023, the emphasis was more on educational outreach to help businesses understand their responsibilities.

Penalties for non-compliance

2024 sees heightened penalties for those failing to meet the economic nexus requirements, reinforcing the state's commitment to fair tax collection. In 2023, penalties were less stringent, focusing more on voluntary compliance opportunities.

Technological advances

The 2024 changes include integrating advanced software solutions for automated tax calculations, aiming for accuracy and reducing administrative burdens. This is an upgrade from 2023, where such technological initiatives were in earlier stages of development.

Audit processes

South Dakota's audit processes in 2024 have become more refined, with enhanced data analytics to identify businesses not adhering to nexus laws. Compared to 2023, these processes were primarily manual, with less reliance on sophisticated data analysis tools.

Sales tax exemption certificates

In South Dakota, sales tax exemption certificates allow eligible buyers to purchase goods and services without paying sales tax. These certificates are typically used by businesses or organizations that are exempt from sales tax due to their specific nature, such as non-profits or resale entities.

To utilize an exemption, the buyer must provide a completed exemption certificate to the seller at the time of purchase. The certificate must include details like the purchaser's information, reason for the exemption, and a signature. Sellers must retain these certificates for audit purposes to prove the legitimacy of tax-exempt transactions. Misuse of exemption certificates can result in penalties.

Sales tax discounts and incentives

As of 2024, South Dakota offers several sales tax incentives and discounts to businesses aimed at fostering economic growth and development within the state. Here’s a brief overview:

Manufacturing & Processing Equipment Exemption: Businesses engaged in manufacturing or processing may benefit from sales tax exemptions on equipment directly used in production. This incentive lowers the cost of acquiring essential machinery.

Contractor’s Excise Tax Refund: For certain projects, particularly those involving new or expanded facilities, businesses can apply for a refund on the contractor's excise tax paid. This reduction in construction costs encourages businesses to invest in new infrastructure.

Renewable Energy Systems Exemption: Sales of parts, machinery, and equipment used in renewable energy systems (such as solar or wind energy) are exempt from sales tax. This encourages businesses to adopt sustainable practices and invest in green technology.

Disability and Elderly Care Facilities Exemption: Items purchased for use by facilities providing care for the elderly or disabled are exempt from sales tax. This incentive supports healthcare and residential services for these communities.

Agricultural Equipment Exemption: South Dakota offers exemptions on certain agricultural equipment and supplies, assisting businesses in the agriculture sector to manage costs effectively.

State tax holidays in South Dakota for 2024

Sales tax holidays are specific periods during which certain products can be purchased without paying state sales tax. Unfortunately, South Dakota does not have any scheduled sales tax holidays for 2024.