South Dakota Sales Tax
South Dakota Sales Tax At a Glance
State rate: 4.5%
Maximum combined rate: 7.5%
Tax Holidays: None
Governing Body: South Dakota Department of Revenue
When you’re thinking about opening a business in South Dakota, or you’re contemplating expanding your service area into the state, it’s important to learn about the sales tax laws there and how they will impact you. While there are many similarities between the sales tax laws in South Dakota when compared with those in other states, there are also some details that are specific to South Dakota that you’ll need to be aware of to ensure you stay compliant at all times.
South Dakota Sales Tax Rates
Like most states, South Dakota has a blanket state sales tax rate of 4.5% that applies everywhere. This is supplemented in most parts of the state by local taxes that bring the total effective rate up to between 5.5% and 7.5%. A few local jurisdictions in the state, like Pine Ridge and Blackhawk, don’t add a tax, which means customers in that area will only pay the 4.5% state rate. There are several special jurisdictions listed in the municipal tax guide, including Cheyenne River, Crow Creek, Oglala, Rosebud, Standing Rock, Sisseton Wahpeton, and Yankton, that include an additional excise tax. An additional 1% municipal gross receipts tax can be imposed locally on alcohol, restaurants, and lodging. Tax rate lookup is available in the municipal tax guide.
South Dakota is a destination-based state regarding sales tax, which means that the applicable rate will be at the place the customer takes possession of the product purchased or the location of services rendered. If you have a physical store, your customers will all pay the rate that is in effect at the store’s location. If you’re shipping products to your customers, however, the applicable rate will be that of the delivery address.
Nexus Regulations in South Dakota
South Dakota can only compel retailers and service providers to collect and remit sales tax on purchases by customers within the state if the seller has a significant presence, or nexus, there. Of course, if you operate a physical store or office in the state, you will be considered to have nexus, and other qualifying conditions include:
- Storing goods in a warehouse in the state
- Having an employee or other representative operating in the state regularly
- Making deliveries in vehicles owned by the seller
- Maintaining contracts for realty improvement in the state
South Dakota’s economic nexus law requires any out-of-state business to collect and remit sales tax to the state if, in the previous or current calendar year:
- They have more than $100,000 in sales of tangible personal property, electronically-delivered products, or services rendered in South Dakota; or
- They sold tangible personal property, electronically-delivered products, or rendered services in 200 or more separate transactions.
At first, this law was considered unconstitutional, and several retailers sued South Dakota. The case was finally settled in June 2018 by the U.S. Supreme Court in a decision known as South Dakota v. Wayfair, Inc. In this case, the Supreme Court overturned the 1992 decision that prevented states from being able to compel retailers with no physical presence to collect sales tax on purchases made within a given state. So it’s important to know the economic nexus law in South Dakota and to understand if your sales are high enough to meet the threshold.
Most sales of tangible personal property, including groceries, are taxable in South Dakota, as are the vast majority of services. Some notable exemptions include:
- Food stamp and WIC purchases
- Warranty parts and services
- Raw materials
- Repair services
- Lottery sales
- Advertising services
- Farm machinery
- Medical devices
- Health services
- Prescription medicine
- Raw materials
All types of digital products and software are taxed, including custom software, and that is true regardless of whether the product is delivered electronically or on physical media. Shipping and handling charges are taxable as long as the product shipped is taxable. Certain organizations or individuals may qualify for exemption certificates to purchase tax-free items that would normally be taxed, but they will need to obtain an exemption certificate from the state and present it at the time of purchase.
Registration and Filing
If you are obligated to collect and remit sales tax in South Dakota, you will have to register with the state. This can be done online through the state website or in person. Because South Dakota is also a full member of the Streamlined Sales and Use Tax Agreement (SSUTA), you can register for a sales tax license through the SSUTA website. However, registering in that way requires you to register with all member states at once, which may or may not make sense for you depending on your situation.
Regardless of how you register, there is no fee, and you may begin making taxable sales in South Dakota as soon as you receive your license in the mail. When you obtain your license, you will also be assigned a filing frequency by the state based on your expected sales. This can be monthly, bi-monthly, semi-annual, annual, or seasonal. Returns can be filed either online or through the mail.
Due Dates and Penalties
Sales tax returns are due on the 20th of the month following the close of the period in question for those filing both electronically and non-electronically. Payments made electronically must be received by the 25th of that same month, while payments for returns filed by mail must accompany those returns. If any of these due dates fall on a weekend or holiday, the returns and payments will be considered timely if received by the next business day.
Monthly Due Dates
Late filing of your South Dakota sales tax returns or late payment of the tax due will result in penalties imposed by the state. The penalty for a failure to pay within 30 days of the due date is 10% of the tax due for every month you are delinquent, with a minimum charge of $10. Interest also accrues at a rate of 1.25% per month, with a minimum of $5 for the first month.
South Dakota Sales Tax Software
Whether you’re selling only in South Dakota or multiple states, keeping track of your sales tax collection, returns, and payments can be a challenge. The various rates in local jurisdictions, combined with the fact that the regulations surrounding the collection of sales tax in each state can change at any time, means that you have to stay vigilant to ensure you’re always completely compliant.
Of course, there are plenty of other aspects of your business you’d rather focus on, and fortunately, TaxTools is a piece of software and tax calculator that can allow you to do just that. With TaxTools, you can be sure your sales are accurately tracked, that sales tax is collected from your South Dakota customers at the appropriate rate, and that all returns are filed on time.
TaxTools keeps abreast of all changes to local and state sales tax laws, and it can provide up-to-date reports on your taxable sales with applicable location information any time you need them. This program also integrates smoothly with all eCommerce platforms, so you won’t have to change anything about how you do business. So if you’re ready to learn how TaxTools can help streamline your sales processes and help your business grow, click here to sign up for a free trial today.
Last Updated August 2022