What Is South Dakota Sales Tax?

South Dakota Tax

The State of South Dakota officially became a Streamlined Sales Tax State on October 1st, 2005. The municipalities of South Dakota have the authority to charge municipal sales tax, gross receipts tax, and use tax. All these taxes are administered by the South Dakota Department of Revenue.

Under some circumstances, the municipalities may charge a general municipal sales tax rate of up to 2%. Similarly, they may charge municipal gross receipts tax of 1% rates in addition to the municipal sales tax. This article will outline the primary information about sales tax in South Dakota. Read on!

Sales Tax

Like other states, the State of South Dakota depends on tax revenues to facilitate the provision of public safety, health care, transport, education, and other public services. Therefore, the South Dakota sales tax is imposed on gross receipts of all retailers, including the lease and sale of real or tangible personal property.

It also applies to the sale of services and all the commodities changing hands through electronic means. In South Dakota, the sales and use tax rate is 4.5%. The laws applicable in South Dakota allow a business person to include sales tax on the price of the products or services they offer.

However, should there be sales tax due, the seller becomes fully liable whether the sales tax was collected or not. It is a compulsory requirement for a business operator to report and pay the sales tax charged on their gross receipts from selling all the goods and services offered. However, there are certain exceptions to this requirement, and they include:

● If the seller receives an exemption certificate from the buyer providing that; the purchase is intended for resale, the purchase is aimed at an exempt use, or that the sale is subject to an exempt entity such as the South Dakota local or state governments.

● If the service provided is one for construction purposes which is taxed under Chapter 10-46A or 10-46B. For more information concerning the tax charged on construction services, consult the Contractor's Excise Tax Guide.

Note that sales tax and excise tax are two different things. Excise tax only applies to particular products such as fuel, alcohol and tobacco, while sales tax is applicable to almost everything including the sale of cars and houses.

Application of Sales Tax in South Dakota

In South Dakota, sales tax is charged at the location where the customer receives the product. Therefore:

● If the buyer collects the products at the seller’s premises, the sales tax will be charged at the seller’s premises.

● Suppose the seller delivers the goods to the buyer by the buyer’s means of delivery or the seller’s means of delivery. The goods will be subject to sales tax at the delivery destination.

● Similarly, the sales tax will be applied at the buyer's address if delivery is made by either the seller or the buyer to an unknown destination.

● Where the products are delivered to another state outside the jurisdiction of South Dakota, the products would not be subject to the sales tax of South Dakota but may be subject to that state's sales tax.

● Where the products are transferred by electronic means but the buyer’s address is not known, or where there is no delivery, the sales tax will be applied at the location where the products are first made available for transfer by the seller.

● Lease or rental products are subject to sales tax at the location where the buyer receives them. However, should the products be transferred to another place, the future sales tax charged on the products will be made at that new location.

● Personal care services, which are services done on the physical human body such as massage, pedicure, haircuts, etc., will be taxed at the location where the customer receives such services.

● Services performed on products such as repair services are taxed at the place where the product is delivered to the buyer.

Distribution of Sales Tax in South Dakota

Remote Sellers

The Government of South Dakota implemented a policy from November 1st, 2018 that mandated remote sellers with specific qualifications to have a mandatory South Dakota sales tax license and subsequently pay the necessary sales tax. Since then, the law obligates any business operating without a physical business license in South Dakota to have a South Dakota sales tax license.

Moreover, pay such necessary taxes as provided so long as the business entity successfully meets the following requirements in their previous or current year calendars:

● If the business entity’s gross revenue from all the sales made in South Dakota exceeds $100,000

● If the business entity made sales delivery into South Dakota following two hundred or more transactions

Gross sales include the sale or transactions including selling or leasing products and services, including the products delivered through electronic means.

Moreover, it is essential to note that any business entity with a physical presence in South Dakota must have a license for tax collection.

However, the abovementioned minimum cut-offs do not apply to such business entities with a physical presence in South Dakota. Every state has different laws governing remote seller taxation. Therefore, if you are a retailer in South Dakota aiming to provide goods and services in other states outside South Dakota, you may not be charged sales tax. However, you might be charged sales tax in those other states.

Marketplace Providers

The Government of South Dakota implemented a policy from March 1st, 2019 that required marketplace providers who met specific qualifications to have a mandatory South Dakota sales tax license and subsequently pay the applicable taxes as provided on behalf of their marketplace sellers.

Ever since this law has mandated marketplace providers to pay sales taxes on all the sales made in South Dakota for their previous or current years. Such criteria include:

● If the business entity’s gross revenue from all the sales made in South Dakota exceeds $100,000

● If the business entity made sales delivery into South Dakota following two hundred or more transactions

Gross sales include the sale or transactions including selling or leasing products and services, including the products delivered through electronic means.

Similarly, it is essential to note that any business entity with a physical presence in South Dakota must have a license for tax collection. However, the abovementioned minimum cut-offs do not apply to such business entities with a physical presence in South Dakota.

Local Retailers

For South Dakota retailers, it goes without saying that if all the criteria for marketplace providers are met accordingly, the marketplace will provide the sales tax. As long as the market is providing the sales tax, the business entity in South Dakota will not be liable to pay sales tax on the sales made through the marketplace.

How to Register for Sales Tax in South Dakota

As a business owner, you have to register for a seller’s permit if you desire to charge sales tax on goods and services offered by your business. With a seller’s permit, you will be able to collect the sales tax instead of the local or state agents collecting the same.

However, to register for Sales Tax in South Dakota, you must meet all the tax compliance requirements, which include:

● Personal identification data such as your SSN, Address, etc.

● Business identification data such as the Business Address, EIN, etc.

● Information about the type of the business entity.

● The description of your business.

● The date of your business entity formation and the date you started the business operations in South Dakota.

How to File and Pay Sales Tax in South Dakota

The process of filing sales tax in South Dakota consists of three primary steps; tax calculation, filing of tax returns, and tax payments.

Step One: Calculating Sales Tax

In order to file sales tax, you have to do a sales tax calculation to know precisely how much you owe the state before making the payment. There are various simple approaches such as using an online sales tax calculator to calculate how much sales tax you owe the state.

When using TaxJar, for instance, you will need to log in to their official website, connect all the channels through which you sell your products, whether Amazon, Shopify, eBay, Square, etc. Once you do that, they will calculate how much tax was charged on the items you sold then provide you with all the information you will require to file your sales tax in South Dakota.

Step Two: Filing Sales Tax

Once you are aware of how much sales tax you owe the state, you can now go ahead and file the tax. There are two options for filing sales tax in South Dakota. To begin with, you can file the sales tax online through the South Dakota Department of Revenue. Similarly, you can file your sales tax through TaxJar's AutoFile system. Their system will automatically file your sales tax and handle the payments as well. With those services, you will be saved from the burden of calculations, filing the nexus sales tax returns, or having to handle the spreadsheets.

Sales Tax Filing Dates

● Regardless of the amount due, returns filed electronically should be filed by the 20th of every month following the reporting period.

● Payments become due on the 25th of every month. However, where the due date for payment or filing of sales tax comes on a Saturday, Sunday, or any legal public holiday, the payment or filing becomes due on the following business day.

● The business entity will be penalized for all late returns or payments, and interests will apply.

● It is a mandatory requirement for one to file the sales tax returns even if there is no amount due.

● If a business entity decides to file its returns on paper, it must file the returns and make payments by the 20th of every month following the reporting period. In such a case, the amount due is immaterial.

Step Three: Making Payments

This is the final step after calculating how much sales tax you owe the State of South Dakota and filing the same. You can pay online through the South Dakota Department of Revenue EPath portal. Similarly, if you decide to use TaxJar's AutoFile system, the system would automatically remit your payments as required.

Ensure You Pay Your Taxes

South Dakota, like other states, has its various tax laws, and it is essential to know which apply to you. This way, you won't evade taxes and end up in trouble. Knowing what taxes you should be paying, when, and how can be a daunting task.

If you need help with understanding applicable taxes as a South Dakota resident, you can contact a professional. Should you require assistance sending your tax return in, you can enlist the help of mail forwarding services to get the job done right. They will be able to refer you to the proper contact to answer your questions.