South Dakota, home to Mount Rushmore and vast open prairies, keeps things simple—including its tax system. Understanding what sales tax is in South Dakota is as straightforward as the state’s wide skies and welcoming communities.
This guide breaks down everything you need to know about South Dakota’s sales tax, from determining the right sales tax rates to understanding exemptions and filing processes. By the end of this comprehensive guide, you’ll be equipped to handle South Dakota’s sales tax with confidence and ease.
Sales Tax Nexus in South Dakota
When a business creates either a physical or economic nexus, it is required to collect sales tax in South Dakota.
Physical Nexus
A physical nexus means having a significant physical presence or engaging in enough activities within a state to require the collection and payment of sales tax. The factors that determine a physical nexus in South Dakota include:
- Physical Location: This includes having an office, a place for distribution, sales, or showcasing products, a warehouse or storage facility, or any other place where you conduct business.
- Inventory in the State: This covers situations where you store your products within the state, even if it’s done through a third-party fulfillment center or 3PL (like Amazon FBA) or an online marketplace.
- Employees, independent contractors, agents, or other representatives operating on your behalf.
- Affiliate Nexus or Click-through Nexus: South Dakota retailers have nexus if they share ownership with an in-state business selling similar products or using local facilities or employees to aid sales. Nexus also applies if a related in-state business delivers their products.
- Presence at Trade Show: An out-of-state retailer doesn’t have nexus in South Dakota if it attends only one trade show per year, regardless of duration, sales, or activity. Nexus applies if more than one show is attended or other business activities occur.
To stay informed about the current criteria for establishing a physical sales tax nexus in South Dakota, take a look at the official regulations available right
here!
Economic Nexus
States have established regulations to collect sales tax from out-of-state sellers who meet certain revenue and/or transaction thresholds. This rule is known as economic nexus.
Beginning July 1, 2023, the
economic nexus threshold in South Dakota is more than $100,000 in gross sales in the previous or current calendar year. The 200-transaction threshold is no longer applicable.
While the nexus criteria mentioned above generally apply to most businesses, additional methods exist for establishing economic sales tax nexus. To access a comprehensive list of these rules, please refer to the
governing laws for economic sales tax nexus requirements in South Dakota.
South Dakota Sales Tax on Goods and Services
One of the first things you need to know is whether the goods you’re selling or services you’re offering are taxable in South Dakota.
Tangible Products
Almost all goods are taxable in South Dakota, including:
The goods that are exempt from sales tax are:
Services
In South Dakota, the majority of service-based transactions, such as information services and employment services, are subject to sales tax.
However, there are specific situations where certain services are taxable. For instance, taxable services are:
- Agricultural services
- Construction services
- Travel agent services
- Insurance services
- Doctors, chiropractors, podiatrists, osteopaths, and physical therapists
Software as a Service (SaaS)/Digital Products
SaaS is taxable in the state of South Dakota.
Digital products (i.e., ebooks, downloadable video content, mobile apps) are also taxable.
Shipping/Handling
Shipping and handling charges in the state of South Dakota are taxable. If a shipment has both taxable and exempt items, only the delivery cost for taxable items is taxed. Freight charges paid directly to the carrier by the buyer are not taxed.
Sales Tax Permits and Licenses in South Dakota
Now that you’ve got a handle on when sales tax nexus applies and which products are taxable in South Dakota, the next important step is getting your South Dakota Seller’s Permit, also known as a sales tax permit.
Seller’s Permit
You can register for a Louisiana Direct Marketer Permit online through the
South Dakota Tax Application or follow our detailed
step-by-step guide for assistance.
Ensure you have specific information on hand when registering for a seller’s permit, including, but not limited to:
- Business Identification Information (name, address, phone number, email address)
- Business Entity Structure (sole proprietorship, partnership, corporation, LLC, etc.)
- Federal Employer Identification Number (EIN or FEIN)
- Owner/Partner/Officer Information
- Business Activity Details (description of products or services sold, sales volume, date of the first sale or the expected date to start dates)
- NAICS code
Registration fee
There is no fee to register for a sales tax permit.
Renewal
In South Dakota, you don’t have to renew your sales tax permit.
Resale Certificate
A resale certificate is a document that allows businesses to buy products without paying sales tax on them as long as they plan to resell those items to customers, who will then pay the tax. As a seller, you can also accept resale certificates from others looking to buy for resale.
In South Dakota, sellers use resale certificates to buy goods from their suppliers that they intend to resell. The issuance of the certificates is always done in good faith that the seller would report tax on the final sale of the items.
You can fill out the South Dakota Sales Tax Exemption Certificate provided by South Dakota after you receive your sales tax permit. You can also fill out the Streamlined Sales and Use Tax Certificate of Exemption if you would like to get
sales tax exemption for multiple states simultaneously. If you don’t want the hassle of registering, sign up for our all-inclusive service that includes sales tax registration.
Streamlined Sales Tax (SST)
The Streamlined Sales Tax (SST) is an initiative to simplify and standardize sales tax regulations across multiple states. South Dakota is a party to this program, meaning it follows the uniform rules and definitions established by SST.
Check with the South Dakota Revenue Services for the most current information on South Dakota’s participation in the Streamlined Sales Tax initiative.
Calculating and Collecting Sales Tax in South Dakota
Sales Tax Computation
In South Dakota, sales tax isn’t just one simple rate; it’s a combination of state and local taxes. To figure out the total sales tax for your calculation, you’ll need to add up the rates for the state, county, and city (if applicable) where your transaction occurs.
Here’s an example. Suppose an out-of-state seller satisfies the economic nexus criteria in South Dakota and sells to a customer in Sioux Falls, SD, with a ZIP code of 57104. In that case, the seller has to charge the customer a total sales tax, which can be broken down as follows:
 |
SALES TAX FORMULA |
RATE |
| State: |
South Dakota |
4.20% |
| County: |
Chittenden |
0.00% |
| District: |
Third District |
0.00% |
| City: |
Sioux Falls |
2.00% |
| Combined Sales Tax Rate = |
6.20% |
|
Origin-based vs. Destination-Based
When making in-state sales, it is important to determine if you are located in an origin-based state or destination-based state to figure out what rate to charge for sales tax.
South Dakota is a destination-based state, meaning sales tax is determined based on the buyer’s location. That means for a South Dakota-based seller, sales tax is generally based on the location of the buyer when selling within the state.
For out-of-state or remote sellers, the sales tax rate is always determined by the buyer’s location. For instance, if you’re selling a product from Mississippi to a customer in Aberdeen, South Dakota, where you have nexus, you’d apply Aberdeen’s sales tax rate to that sale.
To make life easier, consider using sales tax software or consulting a tax professional, like TaxHero, to ensure accurate tax calculations and collections. Understanding these tax rules helps you stay compliant, whether you’re in-state or out-of-state.
Filing and Remitting Sales Tax Returns in South Dakota
The next step after collection is filing and remitting your South Dakota sales tax returns. Filing and remittance can vary in frequency, typically monthly, quarterly, or annually.
- Monthly Filing: Required for businesses with an annual tax liability of $1,000 or more.
- Quarterly Filing: Applies to businesses with less than $1,000 in annual tax liability that do not meet the monthly filing threshold.
- Annual Filing: Typically for businesses with minimal sales tax liability.
It’s crucial to keep accurate records of your sales and tax collections and adhere to the filing schedule set by the state to remain compliant with South Dakota’s sales tax regulations.
Due Dates
In South Dakota, the due date falls on the
20th day of the following month. For instance, sales tax collected in January is due by February 20th for monthly filers.
However, if this day is a holiday, weekend, or in the rare occurrence of a natural disaster, the deadline is typically extended to the next business day. For instance, if you’re a monthly filer and filing sales tax for the month of April, and the May 20th deadline falls on a holiday or weekend, you’ll have until May 21st, the following business day, to submit.
Filing Sales Tax Returns
To file your sales tax return for South Dakota, a few options are available:
- Pay online through the South Dakota website portal.
- File with TaxHero – Let TaxHero take care of it so you don’t have to worry about missing a payment or return.
Timely Filing Discount
Some states offer a discount to businesses for collecting, filing, and remitting sales tax on time as an incentive to process sales taxes promptly. In South Dakota, electronic filers can receive a 1.5% discount on the gross tax due, capped at $70 per return period.
Sales Tax Holiday
Currently, for 2024-2025, there are no planned sales tax holidays in South Dakota.
South Dakota Sales Tax Penalties
Like in most states, sales tax is a big part of how South Dakota generates revenue. Thus, maintaining compliance with sales tax regulations is of utmost importance. Failure to do so can lead to consequences and sales tax penalties. Therefore, it is crucial always to ensure you are up-to-date in filing, collecting, and remitting sales tax to the state.
Here are the specific penalties for non-compliance with sales tax regulations in South Dakota:
- Late Filing Penalty: A 10% penalty (minimum $10) is applied if a return is not filed within 30 days after the due date. The penalty may be reduced or waived if reasonable cause is shown.
- Late Payment Interest: A 1% interest charge (minimum $5) applies for the first month of late payment, increasing by 1% per month thereafter.
- Intentional Non-Payment: If tax is unpaid with the intent to evade or delay payment, interest increases to 1.5% per month (minimum $5).
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