2024 overview of sales tax in South Dakota

Welcome to Kintsugi's rundown on sales tax in South Dakota. South Dakota's sales tax rates can vary depending on state, county/city, and local tax rates.

The base SD state sales tax rate is 4.5%, but the South Dakota sales tax rate can vary with additional local taxes due to sales tax SD policies.

Among the counties, Minnehaha County has one of the highest additional sales tax rates, bringing the total to around 6.5%, similar to the sales tax in Sioux Falls SD, which also includes local rates.

For example, 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.

Conversely, Harding County has no additional county sales tax, maintaining the base 4.5%, unlike the higher sales tax in Sioux Falls SD which incorporates both state and local rates.

District sales tax rates further diversify the landscape; for instance, Sioux Falls has a combined rate of 6.5%, one of the highest, due to the sales tax Sioux Falls SD. Meanwhile, districts like Wall remain at the base state rate, aligning perfectly with the South Dakota sales tax rate of 4.5%.

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.

Understanding use tax in South Dakota

Use tax in South Dakota is a tax levied on goods and services purchased for use within the state but for which what is South Dakota sales tax was not collected at the point of sale. This commonly applies to out-of-state purchases, online shopping, or goods bought in jurisdictions with a lower sales tax rate than South Dakota’s. The use tax rate in South Dakota mirrors the state’s sales tax rate, which as of 2024, stands at 4.5% according to sd state sales tax policies. This rate answers how much is sales tax in South Dakota, highlighting the consistent application of the sales tax South Dakota enforces across different tax types.

The primary intent behind the use tax is to create a level playing field for in-state retail businesses who must charge sales tax, thereby preventing an unfair price advantage for out-of-state or online sellers. Importantly, South Dakota law requires both individuals and businesses to report and pay use tax if the seller did not collect sales tax.

Compliance with the use tax and sd sales tax is facilitated through self-reporting. Businesses typically report use tax via their monthly sales and use tax return. For individuals, this tax can be reported on the South Dakota Individual Use Tax Return form. It’s mandatory to keep records of all purchases subject to use tax, including invoices and receipts, to verify payment of the due tax.

Non-compliance carries penalties, including interest on the owed amount and possible fines, underscoring the importance of accurate and timely reporting. The South Dakota Department of Revenue is tasked with enforcing these regulations and providing guidance to businesses and residents on their responsibilities regarding use tax.

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.

Excise and discretionary taxes and other sales tax considerations in South Dakota

Sure, I'd be happy to provide information on special excise taxes, discretionary taxes, and other sales tax considerations in South Dakota as of 2024.

Special Excise Taxes

Contractor's Excise Tax: South Dakota imposes a contractor's excise tax of 2% on the gross receipts of contractors performing realty improvements or other construction work.

Motor Vehicle Excise Tax: When you purchase a motor vehicle in South Dakota, an excise tax of 4% is applied to the purchase price.

Tourism Tax: There is a tourism tax of 1.5% on certain lodging, amusement, and other travel-related services.

Discretionary Taxes

Municipal Sales and Use Tax: Local municipalities in South Dakota have the discretion to impose their own additional sales taxes, generally up to 2%, on top of the state's base sales tax rate.

Local Option Taxes: Some counties and cities might impose additional local option taxes to fund specific projects or services. These are usually subject to local voter approval and can vary widely.

Sales Tax Considerations

State Sales Tax Rate: The base state sales tax rate in South Dakota is 4.5%.

Remote Sellers and Marketplace Facilitators: South Dakota requires remote sellers (businesses without a physical presence in the state) and marketplace facilitators (third-party platforms that facilitate sales) to collect and remit sales tax if their gross revenue from sales exceeds $100,000 or they have 200 or more transactions in the state annually. This is in line with the 2018 Supreme Court ruling in South Dakota v. Wayfair, Inc.

Agricultural Products: Certain agricultural products may not be subject to sales tax. For detailed information, it's best to check with the South Dakota Department of Revenue.

Exemptions and Reductions: There are various exemptions and reductions available for specific goods, services, or buyer classifications. Examples include exemptions for sales to nonprofit organizations, governmental entities, and for certain medical equipment and services.

Understanding nexus in South Dakota for local and out-of-state sellers

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.

Affiliate nexus

Affiliate nexus in South Dakota for sales tax in 2024 involves specific criteria which retailers and businesses need to be aware of. Here are the requirements and changes noted in 2024, compared to 2023:

Physical Presence: Any business with a tangible physical presence in South Dakota, such as a storefront or office, remains subject to sales tax collection. This criterion has not changed from 2023 to 2024.

Economic Nexus Threshold: In 2024, out-of-state businesses must collect sales tax if their gross sales exceed $100,000 or they have 200 separate transactions in South Dakota. These thresholds are unchanged from 2023, indicating a consistent approach to economic nexus.

Affiliate Nexus Criteria: Businesses with affiliates in South Dakota that facilitate sales, use the same brand name, or engage in substantially similar business activities, are required to collect sales tax in 2024. This rule continues from 2023 without modification.

Marketplace Facilitators: As of 2024, marketplace facilitators handling transactions for third-party sellers must collect and remit sales tax if they meet the economic nexus threshold—consistent with the 2023 stipulations.

Software and Digital Goods: Digital goods and downloadable software remain taxable under South Dakota's regulations in 2024, with no new changes from the policies established in 2023.

Remote Sellers: Remote sellers with no physical presence but meeting economic nexus thresholds must comply with South Dakota’s sales tax laws in 2024 just as they did in 2023.

Click-through nexus

South Dakota has implemented updates to its click-through nexus provisions for sales tax SD in 2024, affecting remote sellers and marketplace providers. The state defines click-through nexus based on the referral of sales through links or advertisements on websites hosted by South Dakota residents.

In 2023, these standards were less stringent:

• A remote seller had to rely on South Dakota residents to refer potential customers through a paid link or website.
• Sales referred exceeded $10,000 within the preceding 12 months.

The new 2024 standards are more comprehensive:

• The $10,000 threshold remains, but now remote sellers must also adhere to South Dakota's overall economic nexus thresholds, which combine these click-through sales with other sales.
• An additional requirement includes the necessity for remote sellers to obtain written agreements with in-state entities to track and report referred sales properly.

In comparison, specific updates include:

• In 2023, the main criterion was the $10,000 threshold by paid referrals. In 2024, combining economic nexus thresholds with click-through thresholds adds complexity.
• Reporting requirements in 2024 demand written agreements and more stringent tracking by remote sellers, unlike the simpler 2023 requirements.

Marketplace nexus

Marketplace Nexus for Sales Tax in South Dakota: 2024 Requirements

Economic Threshold: Remote sellers must collect sales tax if annual gross revenue from sales into South Dakota exceeds $100,000 or if there are 200 or more separate transactions.

Marketplace Facilitators: Entities facilitating sales on behalf of third-party sellers must comply with the same $100,000 revenue or 200 transaction thresholds.

Reporting and Remittance: Marketplace facilitators are responsible for collecting and remitting sales tax on behalf of sellers using their platform.

Consolidated Filing: Marketplace facilitators must include detailed reports on transactions and tax remittance to ensure proper compliance.

2023 Nexus Requirements

Economic Threshold: Similar to 2024, remote sellers had to meet or exceed the $100,000 revenue or 200 transaction benchmark to establish a sales tax nexus.

Marketplace Facilitators: Required to adhere to the same economic thresholds as remote sellers, ensuring the collection and remittance of sales taxes.

Reporting and Remittance: Marketplaces were mandated to collect and remit taxes for all facilitated sales but had fewer reporting obligations than those set for 2024.

Compliance Regulations: 2023 had simpler compliance requirements compared to the more comprehensive and detailed reporting enforced in 2024.

Trade shows

Tradeshows in South Dakota in 2024 present unique sales tax obligations for vendors. The key points related to these obligations are:

• Vendors participating in tradeshows must register for a South Dakota sales tax license.
• Sales of tangible personal property at tradeshows are subject to South Dakota sales tax.
• Use tax applies to items purchased without sales tax and then used in the state.
• Tradeshows lasting more than one day require daily sales tax collection.
• Sales tax reports and payments are due by the 20th of the month following the event.
• Special tax rates may apply depending on the type of goods sold.
• Vendors should maintain detailed records of sales and tax collected at each event.
• Non-compliance can result in penalties and interest on unpaid taxes.

Fulfillment by Amazon and nexus

Fulfillment By Amazon (FBA) is a service offered by Amazon to third-party sellers where Amazon handles storage, packaging, and shipping of products. Sellers send their products to Amazon fulfillment centers, and Amazon takes care of the logistics.

Sales tax obligations under South Dakota law in 2024 for FBA sellers include:

Interstate sellers: Those with no physical presence in South Dakota but have economic nexus (cross $100,000 in sales or 200 separate transactions annually) must collect and remit South Dakota sales tax.

Marketplace facilitators: Since Amazon is defined as a marketplace facilitator, it is responsible for collecting and remitting sales tax on behalf of third-party sellers for deliveries into South Dakota.

Business registration: To comply, sellers must register for a South Dakota sales tax license if they meet the economic nexus threshold, even if Amazon collects the tax.

Filing and reporting: Sellers must properly file sales tax returns on a scheduled basis, detailing taxable sales, even if Amazon collects and remits the tax.

Compliance: Non-compliance or underreporting may result in penalties, interest, or audits conducted by the South Dakota Department of Revenue.

Permits, certificates and sales tax registration in South Dakota

Registering for sales tax in South Dakota involves a few straightforward steps. First, you need to obtain a South Dakota tax license by completing an application with the Department of Revenue. You'll need to provide basic business information, such as your federal employer identification number (EIN), or Social Security number if you're a sole proprietor. Once registered, you'll be responsible for collecting and remitting sales tax on taxable goods and services sold in the state.

Registering for sales tax collection in South Dakota

To register for sales tax collection in South Dakota in 2024, follow these steps:

Determine if You Need to Register: Confirm that your business activities require you to collect sales tax. This is typically necessary if you sell tangible personal property, services, or certain digital products within the state.

Prepare Required Information: Gather the necessary information for registration. This may include your business name, address, employer identification number (EIN), names and addresses of owners or officers, and details about your business activities.

Online Registration:

• South Dakota provides an online portal for tax registration. Visit the State of South Dakota's Department of Revenue website and navigate to the sales tax section.
• Create an account if you don't already have one. This account will be used to manage your tax obligations.
• Complete the online registration form. Be ready to input detailed information about your business operations and planned sales within the state.

Review and Submit: Carefully review your application to ensure all information is accurate and complete. Once satisfied, submit your registration.

Confirmation and Account Setup: After submission, you will receive a confirmation of your registration. This may include a unique sales tax license number that you will use for collecting and remitting sales tax.

Compliance: Immediately begin to comply with South Dakota's sales tax laws. Collect sales tax at the point of sale, and ensure you maintain accurate records of your transactions and tax collected.

Filing and Remittance: Adhere to South Dakota's schedule for filing sales tax returns and remitting the collected sales tax. The state will provide detailed instructions on how and when to file these returns.

Cost of registering for sales tax in South Dakota in 2024

As of 2024, there is no fee for registering for a sales tax license in South Dakota.

The state offers a straightforward online application process through the South Dakota Department of Revenue's website for businesses needing to register for sales tax. Once registered, the business is required to collect and remit sales tax according to state regulations.

Federal tax ID requirements for registering

In South Dakota, an Employer Identification Number (EIN) is not a specific requirement for registering for a sales tax license. However, having an EIN is generally beneficial and often necessary for many business activities, including hiring employees, opening a business bank account, and filing federal and state taxes.

If you do need an EIN, you can obtain one through the IRS. Here is the direct link to apply for an EIN: IRS EIN Application.

To register for a sales tax license in South Dakota, you will need to go through the South Dakota Department of Revenue. You can register your business for sales tax online via their site. Here is the link to register for a sales tax license: South Dakota Department of Revenue Business Tax Registration.

Make sure to have all your business details ready when you start the registration process. If you encounter any issues or have questions, the South Dakota Department of Revenue provides customer support to assist with the registration process.

Streamlined sales tax program and South Dakota

As of 2024, South Dakota is a member of the Streamlined Sales Tax (SST) program.

The SST program is an initiative to simplify and modernize sales and use tax administration in order to reduce the burden of tax compliance. South Dakota has been a part of this program since its early years in an effort to make it easier for businesses to comply with the tax laws. If you are operating a business and need more specific guidance, it’s always a good idea to consult with a tax professional or visit the official Streamlined Sales Tax Governing Board website.

Acquiring a business and registering for sales tax in South Dakota

Registering for sales tax in South Dakota as part of acquiring a business involves several steps. Here’s a straightforward guide for 2024:

Determine Eligibility: Confirm that your business activities require sales tax registration. If you are selling tangible personal property, products transferred electronically, or providing taxable services, you typically need to register.

Obtain Employer Identification Number (EIN): Ensure that your business has an EIN from the IRS, if it doesn’t already have one. This number is necessary for state tax registration.

Gather Business Information: Prepare the required information for your business. This usually includes:

• Legal name of the business
• Business trade name (if different)
• Business address (physical and mailing)
• Description of business activities
• Date you started doing business in South Dakota
• Contact information (names, addresses, and Social Security numbers of owners, partners, or officers)
• Federal EIN
• South Dakota Secretary of State number (for corporations, LLCs, or partnerships)

Complete Sales Tax Application: Submit an application for a sales tax license. This can typically be done online through the South Dakota Department of Revenue's Business Tax Division. Make sure to provide all necessary information accurately.

Local Licenses and Permits: Depending on the locality of your business within South Dakota, you may also need to apply for local licenses or permits.

Compliance Rules: understand and comply with state-specific rules regarding tax collection, filing, and remittance. South Dakota mandates that taxes collected need to be reported and paid in a timely manner (either monthly, quarterly, or annually based on your business's tax liability).

Review Existing Obligations: If you're acquiring an existing business, review any prior tax obligations or liabilities associated with it. Ensure all previous tax dues are settled to avoid inherited issues.

Post-Acquisition Notification: Notify the South Dakota Department of Revenue about the business acquisition. Sometimes this grants you an opportunity to ensure a smooth transition of the sales tax account from the previous owner to you.

After completing these steps, you should receive a sales tax permit from the state, allowing you to collect and remit sales tax legally. Always keep on top of any updates or changes to tax laws that might affect your business operations.

Other South Dakota registrations to consider

In South Dakota, aside from sales tax registration, there are several other registrations and licenses you may need to consider, depending on the nature of your business. Here are some key considerations:

Business Registration: First, you need to register your business with the South Dakota Secretary of State. This is necessary for most business structures, including corporations, LLCs, partnerships, and sole proprietorships.

Employer Identification Number (EIN): If you plan to hire employees or if your business operates as a corporation or partnership, you'll need to obtain an EIN from the IRS.

Unemployment Insurance Tax: If you have employees, you must register for unemployment insurance tax through the South Dakota Department of Labor and Regulation.

Workers' Compensation Insurance: Employers in South Dakota are generally required to carry workers' compensation insurance to cover employees in case of work-related injuries.

Professional and Occupational Licensing: Depending on your business activities, you may need specific professional licenses. For example, trades like electricians, plumbers, and real estate agents require licensing.

Alcohol and Tobacco Licenses: If your business involves the sale of alcohol or tobacco, you need to obtain the appropriate licensing from the South Dakota Department of Revenue.

Health Permits: If you're in the food service industry, you'll need health permits and undergo inspections by the South Dakota Department of Health.

Environmental Permits: Certain businesses may require environmental permits from the South Dakota Department of Environment and Natural Resources, especially if they have the potential to affect air, water, or land quality.

Retailer’s Permit: Specific to sales tax, ensure you have a Retailer’s Permit issued by the South Dakota Department of Revenue to legally collect and remit sales tax.

Local Permits and Licenses: Check with city and county governments where your business operates, as there may be local licenses and permits required.

Requirements for online sellers in South Dakota

Yes, there are specific requirements for online sellers when it comes to sales tax collection in South Dakota.

Since the South Dakota v. Wayfair, Inc. decision by the U.S. Supreme Court in 2018, online sellers who meet certain thresholds must collect and remit sales tax in South Dakota. Here are the key points:

Economic Nexus Threshold: If an online seller makes over $100,000 in sales or engages in 200 or more separate transactions in South Dakota in a calendar year, they are required to collect and remit sales tax to the state.

Remote Seller Registration: Sellers meeting the economic nexus threshold must register for a sales tax permit with the South Dakota Department of Revenue.

Tax Collection: Once registered, remote sellers are required to collect South Dakota sales tax on all taxable sales made to customers in the state.

Filing Returns: Online sellers must file periodic sales tax returns, usually monthly or quarterly, depending on their sales volume. These returns report the sales tax collected and the amount due to the state.

Record Keeping: Sellers must maintain accurate records of all sales transactions, tax collected, and tax returns filed to comply with state regulations and for audit purposes.

Collecting sales tax in South Dakota

In 2024, South Dakota implements a streamlined system for collecting sales tax, ensuring businesses easily comply with state regulations. Both traditional retailers and e-commerce platforms must collect the state's 4.5% sales tax on all taxable goods and services, supporting public services and infrastructure across the state.

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.

Non-taxable products in South Dakota

In South Dakota, various product genres are exempt from sales tax. While this list evolves, some common categories that typically enjoy exemption include:

Food and Groceries: Most unprepared foods and groceries are exempt from state sales tax.

Prescription Medications: Medicines prescribed by a healthcare provider are usually not subject to sales tax.

Medical Devices: Certain medical and mobility devices often enjoy sales tax exemptions.

Non-Profit Organizations: Sales to qualified non-profit organizations may be exempt from sales tax.

For the most accurate and up-to-date information, please refer to the South Dakota Department of Revenue. Things are changing all the time so please refer to the South Dakota Department of Revenue for more information about taxable items within South Dakota.

You can visit South Dakota Department of Revenue for detailed and current information on sales tax exemptions.

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.

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.

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.

Filing sales tax returns in South Dakota

To file sales taxes in South Dakota in 2024, follow these steps:

Determine Filing Frequency: Based on your business’s sales volume, the South Dakota Department of Revenue will notify you whether to file monthly, quarterly, or annually.

Register for a Sales Tax License: Apply for a sales tax license through the South Dakota Department of Revenue’s online portal before making sales.

Collect Sales Tax: Charge the appropriate state (4.5%) and local sales tax rates at the point of sale.

Keep Accurate Records: Maintain detailed records of all sales transactions and tax collected.

File Online: Log in to the ePath system South Dakota's online tax filing system to submit your sales tax return.

Calculate Tax Due: Sum the total sales tax collected during the filing period and enter this figure on the online form.

Make Adjustments: Account for any adjustments, exemptions, or deductions as allowed by South Dakota law.

Submit Payment: Pay the calculated amount either electronically through the ePath system or via another approved payment method.

Receive Confirmation: Upon successful submission, you will receive a confirmation from the Department of Revenue.

Meet Deadlines: Ensure returns and payments are submitted by the 20th of the month following the reporting period to avoid penalties.

Sales tax filing frequency

In the state of South Dakota, businesses are required to manage their sales tax obligations meticulously. The frequency with which businesses need to file and remit sales taxes depends primarily on the amount of sales tax the business collects.

There are three primary filing frequencies: monthly, quarterly, and annually.

Monthly Filers: Businesses that collect a significant amount of sales tax, generally over a specified threshold set by the South Dakota Department of Revenue, are required to file their sales tax returns on a monthly basis. This ensures that the state receives tax revenues in a timely manner.

Quarterly Filers: For businesses that collect sales tax amounts that fall below the monthly filing threshold but above a lower specified threshold, quarterly filing is mandated. These businesses submit tax returns and remit collected taxes every three months.

Annual Filers: Small businesses with minimal sales tax collections are allowed to file annually. This is beneficial for small enterprises as it reduces the administrative burden of frequent filings and allows them to consolidate their tax reporting once per year.

The South Dakota Department of Revenue regularly reviews accounts and may adjust a business's filing frequency based on changes in sales tax collection levels. Businesses are notified of their filing frequency upon registration and any subsequent changes are communicated to ensure compliance. Additionally, all businesses are required to file sales tax returns, even if no sales were made during the reporting period.

Filing when no sales tax has been collected

In South Dakota, if a business is registered for sales tax but fails to collect it, the business remains responsible for the uncollected tax. This oversight could lead to penalties and interest on the unpaid amounts.

The state may audit the business, and if non-compliance is discovered, the business may be required to provide documentation or pay the owed sales tax directly. It's crucial for registered businesses to collect and remit sales tax accurately to avoid these financial and legal repercussions.

Penalties for late filing and non-payment of sales taxes

In South Dakota, timely filing and payment of sales taxes are critical to avoid penalties.

For the year 2024, if a business files its sales tax return late, the South Dakota Department of Revenue imposes a penalty of 10% of the tax due or $10, whichever is greater. Interest also accrues on unpaid taxes from the due date at a rate established annually.

Non-payment of sales taxes is treated seriously; failure to remit collected sales tax is considered illegal and can lead to significant repercussions. Businesses may face liens, garnishments, or even license revocation. Additionally, officers and owners can be held personally liable.

To prevent these issues, businesses should ensure they adhere to filing deadlines and remit tax payments punctually. Digital tools and scheduled reminders can help maintain compliance. Proactive communication with the Department of Revenue can also assist in resolving inadvertent delays or discrepancies, potentially mitigating 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.

2024 sales tax filing due dates for South Dakota

Coming soon.

Shipping and sales tax in South Dakota

When to pay tax on shipping in South Dakota

In South Dakota, sales tax is generally applied to the total purchase price of goods, which includes any charges for shipping and handling. This means that if a business charges a customer for shipping when selling a product, that charge is typically subject to sales tax.

Specifically, as of my knowledge cutoff date in October 2023, the South Dakota Department of Revenue indicates that shipping and handling charges are taxable if they are part of the total sales price of the goods being sold. This applies regardless of whether the shipping charges are separately stated or included in the total price of the item.

However, it's always a good idea to check with the South Dakota Department of Revenue or consult a tax professional for the most current information and guidance, as tax laws and regulations can change.