Sales Tax Guide for South Dakota

What Is Taxable in South Dakota?

In South Dakota, most tangible personal property is subject to sales tax. However, there are exemptions for specific items, such as prescription drugs and certain agricultural products. Some services are also taxable, including telecommunications and repair services.

If your business sells taxable goods or services, it is mandatory to collect and remit sales tax appropriately. Businesses should also verify if additional use taxes are applicable when procuring out-of-state products.

Who Needs to Collect Sales Tax?

Businesses required to collect sales tax include:

• Retailers with a physical presence in South Dakota
• Online sellers that meet the state’s economic nexus threshold
• Service providers that offer taxable services

South Dakota enforces an economic nexus threshold of $100,000 in sales or 200 transactions per year. Businesses meeting this threshold, even without a physical presence, must register and collect sales tax. Failing to do so could result in penalties and back taxes. That’s why doola’s Bookkeeping service can be critical in staying compliant and avoiding legal complications. 

How to Register for a Sales Tax Permit in South Dakota

Acquiring a sales tax permit in South Dakota is straightforward:

1. Gather necessary documents: EIN, business license, and all pertinent business details.
2. Visit the South Dakota Department of Revenue website.
3. Complete the online application for a sales tax permit.
4. Once received, begin collecting tax immediately.

Collecting sales tax without a valid permit is illegal, so ensure registration prior to making taxable sales. You can rely on doola’s expert bookkeeping team to assist with the process, reducing stress while you focus on growing your business. 

How to Calculate Sales Tax in South Dakota

To accurately calculate sales tax, follow these steps:

Step 1:
Identify the correct sales tax rate based on your business location and the customer’s location.

Step 2:
Collect the appropriate tax at the point of sale.

Step 3:
Maintain detailed records of all transactions.

Depending on sales volume, South Dakota requires businesses to file sales tax returns monthly, quarterly, or annually. Make sure to adhere to filing deadlines to avoid penalties.

Certain counties and municipalities may have additional sales tax, requiring you to adjust your calculations based on location-specific rates.

Common Sales Tax Exemptions in South Dakota

Some businesses and organizations qualify for sales tax exemptions, such as:

• Purchases for resale (provided a resale certificate is used)
• Sales to nonprofit organizations
• Qualified agricultural purchases

To claim an exemption, businesses must utilize correct exemption certificates and maintain precise records. Misuse could lead to audits and fines.

Remote Seller and Marketplace Sales Tax Rules in South Dakota

South Dakota has specific sales tax regulations for remote sellers and marketplaces like Amazon, eBay, Shopify, and Etsy. 

The economic nexus threshold of $100,000 in sales or 200 transactions dictates compliance with the state’s remote seller sales tax regulations.

Additionally, South Dakota participates in the Streamlined Sales Tax (SST) initiative, designed to simplify compliance for remote sellers across multiple states.

What Triggers a Sales Tax Audit

Businesses in South Dakota may be audited for various reasons, including missing or incorrect sales tax filings, frequent late payments, discrepancies between reported sales and actual revenue, and misuse of exemption certificates.

Reducing audit risk involves keeping organized records of sales, exemptions, and tax payments. Regular internal reviews ensure accuracy in tax filings.

FAQs About Sales Tax in South Dakota

Common questions about South Dakota sales tax include:

Does South Dakota tax digital goods? 

Yes, certain digital goods are taxable. Always refer to state guidelines for specifics.

Do remote sellers need to collect South Dakota sales tax? 

If the $100,000 or 200-transaction nexus threshold is surpassed, they must collect sales tax.

What if I overcharge or undercharge sales tax? 

Overcharging may necessitate customer refunds, while undercharging could require payment to the state. Keeping accurate records is crucial.

Are services taxable in South Dakota? 

Yes, several services, including those related to repair and telecommunications, are taxable.

Stay Compliant With doola

Sales tax compliance is manageable when handled correctly. Staying informed and utilizing the right tools prevents penalties and keeps your business operational.

doola can provide guidance and tools to ensure compliance, supporting businesses with financial solutions, tax guidance, and bookkeeping.