RATE OF SALES TAX:
4.50%
LOCAL & COUNTY MAXIMUM RATES:
4.50%
What Are the Taxable Goods and Services?
The first step in sales tax compliance is determining if the items or services your firm offers are taxable in South Dakota.
Traditional Products and Services
Physical property, such as furniture, household appliances, and automobiles, is subject to sales tax in South Dakota.
Prescription medications and fuel are tax-free purchases.
South Dakota is unusual in that practically all services are taxed. Construction is the only significant service that is not taxed.
Digital Products and Services
A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.
Businesses in South Dakota are required to collect sales tax on the sale of digital products or services.
How to Register for Sales Tax in South Dakota
If you have concluded that you must charge sales tax on part or all of the products and services that your company sells, the next step is to apply for a seller’s licence.
This enables your company to collect sales tax on behalf of the municipal and state governments.
You will need the following information to register:
Personal identifying information (SSN, address, etc.)
Identification information for a business (EIN, address, etc.)
Type of business entity
Description of the company
In South Dakota, Date began conducting business.
A Resale Certificate might help you save money.
When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.
Sales Tax Collection
After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.
When computing sales tax, consider the following types of transactions:
Retail Sales
Shipping inside the state
Out-of-State Purchases
Retail Sales
For conventional company owners who sell products or services on-site, calculating sales tax is simple: all sales are taxed at the rate determined by the store’s location.
Here’s an illustration of how this situation may look:
In Rapid City, South Dakota, Mary owns and operates a bookshop. Because books are taxable in South Dakota, Mary charges a flat-rate sales tax of 6.500% on all purchases. This includes the state sales tax of 4.000% in South Dakota and the Rapid City sales tax of 2.500%.
Sales inside the state
South Dakota has what is known as a destination-based sales tax scheme. This implies that long-distance transactions inside South Dakota are taxed based on the buyer’s address. This regulation applies to sales taxes levied by the state, county, and city.
Consider the following scenario:
Steve operates his own eBay electronics company from his home in Sioux Falls, South Dakota. A buyer from Aberdeen discovers Steve’s eBay website and buys a $350 set of headphones. Steve uses the South Dakota state tax rate of 4.000%, plus the municipal tax rate of 2.500%, when computing the sales tax for this transaction. The total cost is $372.75 ($22.75 sales tax) at a total sales tax rate of 6.500%.
Out-of-State Purchases
Businesses in South Dakota must only pay sales tax on out-of-state sales if they have nexus in other states.
Nexus indicates that the company has a physical presence in another state.
Common nexus types include:
A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.
Submit Your Sales Tax Return
You’re ready to submit your sales tax return now that you’ve obtained your South Dakota seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.
How to File a Claim
Businesses in South Dakota are required to file sales tax forms and make sales tax payments online.
How Frequently Should You File?
The frequency with which you must submit is determined by the total amount of sales tax collected by your firm.
Quarterly filing: If your company receives between $200 and $1,000 in sales tax each month, you will most likely be required to submit quarterly reports.
Bi-monthly filing: If your company receives $500 to $1,000 in sales tax each month, you will most likely be obliged to submit every other month.
Monthly filing: If your company receives more than $1,000 in sales tax each month, you will almost certainly be required to submit monthly returns.
Deadlines for Filing
The deadline for all South Dakota sales tax returns is the 23rd of the month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day.
Penalties for Filing Late
South Dakota has a late filing penalty of 10% of the total tax owed, with a $10 minimum penalty.
For every unpaid tax or penalty, the state charges a compounding interest rate of 1% each month.