South Dakota — Sales & Use Tax

South Dakota imposes a state sales tax on the gross receipts of all retail sales, including the sale, lease, or rental of tangible personal property or any product transferred electronically, and the sale of services.

Source: South Dakota Department of Revenue — Sales & Use Tax

The state sales and use tax rate is 4.2%.

Source: South Dakota Department of Revenue — Sales & Use Tax

This rate is temporarily reduced from the standard 4.5% rate. The temporary 4.2% rate became effective July 1, 2023, and is scheduled to sunset back to 4.5% on July 1, 2027.

Source: South Dakota Department of Revenue — Sales & Use Tax Laws & Regulations

In addition to the state rate, municipalities may impose local sales and use tax of up to 2% and a 1% municipal gross receipts tax on certain categories.

Source: South Dakota Department of Revenue — Sales & Use Tax

## Use Tax

If a purchaser buys products or services from a vendor who is not licensed to collect South Dakota sales tax, the purchaser may owe use tax. The purchaser or consumer of the goods or services is responsible for reporting and remitting the use tax in the filing period in which they receive the goods or services.

Source: South Dakota Department of Revenue — Sales & Use Tax Laws & Regulations

The state use tax rate is the same as the sales tax rate: 4.2%.

Source: South Dakota Department of Revenue — Sales & Use Tax

## Statutory Authority

Laws associated with the state sales tax are codified in SDCL 10-45. Use tax laws are codified in SDCL 10-46.

Source: South Dakota Department of Revenue — Sales & Use Tax Laws & Regulations

South Dakota requires remote sellers without physical presence in the state to collect and remit sales tax if their gross revenue from sales into South Dakota exceeds $100,000 in the current or previous calendar year. Effective July 1, 2023, the state eliminated its prior 200-transaction threshold, simplifying the nexus standard to revenue only. Gross sales include selling, renting, or leasing products or services, including products delivered electronically.

Source: South Dakota Department of Revenue, 2023 Legislative Updates

Any business with physical presence in South Dakota is required to obtain a sales tax license. Remote sellers without physical presence must register if their gross revenue from sales into South Dakota exceeds $100,000 in the current or previous calendar year. Businesses may register through the Streamlined Registration System or the state's online tax application portal at the Department of Revenue website.

Source: South Dakota Department of Revenue — Sales & Use Tax

South Dakota requires marketplace providers to obtain a sales tax license and collect tax on all sales facilitated into the state if any of the following conditions are met: (1) the marketplace provider itself exceeds $100,000 in gross revenue from sales into South Dakota in the current or previous calendar year; (2) the provider facilitates sales for at least one marketplace seller that exceeds the $100,000 threshold; or (3) the provider facilitates sales for two or more marketplace sellers that, when combined, exceed the $100,000 threshold. This requirement took effect March 1, 2019.

Source: South Dakota Department of Revenue — Sales & Use Tax

South Dakota exempts sales of tangible personal property and services purchased for resale from sales tax. A business that purchases items to sell, rent, or lease to others in the normal course of business may purchase those items exempt from sales tax by providing the seller with a properly completed exemption certificate listing its South Dakota tax permit number.

Exemption certificate requirements

The purchaser must provide an exemption certificate to the seller. South Dakota uses the Streamlined Sales and Use Tax Certificate of Exemption, which may be issued as either a single-purchase certificate (covering one transaction) or a blanket certificate (covering future purchases of qualifying exempt items). Exemption certificates do not expire unless the information on the certificate changes; however, the Department of Revenue recommends updating exemption certificates every three to four years.

Services purchased for resale

Services may be purchased for resale without sales tax if the purchaser provides an exemption certificate and specific conditions are met. Under S.D. Admin. R. 64:06:01:08.03, a service sale qualifies for the resale exemption when: (1) the service is purchased for or on behalf of a current customer; (2) the purchaser does not use the service in any manner; and (3) the service is delivered or resold to the customer without any alteration or change.

State law permits engineers, architects, and surveyors to purchase services for resale when the purchases are made for a client and used in the performance of a contract, even when the three-prong test is not fully met.

Contractor purchases

South Dakota law treats contractors as the users and consumers of all materials incorporated into a construction project. Businesses should charge sales tax on the sale, rental, or lease of all products to contractors. However, contractors who also operate retail stores and hold a sales tax permit may purchase merchandise for resale by providing an exemption certificate. If a contractor subsequently uses merchandise purchased for resale, the contractor must pay use tax on the cost of the merchandise.

Misuse and conversion to taxable use

If a business legitimately purchases an item for resale but later uses that item, the purchaser is responsible for reporting and paying use tax on the item. A purchaser who intentionally files an exemption certificate with the intent to evade payment of tax and fails to timely report it may be subject to a Class 1 misdemeanor charge under SDCL 10-45-61 and a 50% additional charge on the tax owed, in addition to the tax due.

Source: South Dakota Department of Revenue, Exemption Certificate

Source: S.D. Admin. R. 64:06:01:08.03

## Filing Frequency Assignment

The South Dakota Department of Revenue assigns each business a filing frequency upon licensure. Businesses are notified of their assigned filing frequency, which determines whether they file monthly, quarterly, or on another periodic basis. Filing frequencies may include monthly, bimonthly, semiannual, or annual reporting periods.

## Return Due Date

All sales and use tax returns, regardless of filing frequency, are due by the 20th day of the month following the reporting period. For example, a return for the January reporting period is due by February 20th.

When the 20th falls on a Saturday, Sunday, or legal holiday, the due date shifts to the next business day.

## Payment Deadlines

Paper filers: Payment is due at the same time as the return—by the 20th of the following month.

Electronic filers: While returns are due by the 20th, businesses filing electronically may schedule payments through the 25th of the month.

## Timely Filing Discount for Online Filers

As of January 2020, South Dakota offers a timely filing discount to businesses that file electronically. The discount equals 1.5% of the tax due, with a maximum of $70 per reporting period. This discount applies only to returns filed on time through the state's online Filing & Tax Payment portal.

## Late Filing Penalties and Interest

Returns filed past the due date are subject to penalty and interest charges. Interest accrues at 1% per month on any past-due tax until paid in full. A minimum interest charge of $5.00 applies for the first month.

## Amended Returns

Businesses may file amended returns if the correction is made within 36 months of the original due date. Businesses with an account in the online Filing & Tax Payment portal may amend returns one time through the portal. Paper filers or those who cannot amend through the online portal must call the Department at 1-800-829-9188 to request an amended return form.

Source: South Dakota Department of Revenue — Sales & Use Tax Laws & Regulations