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South Dakota Sales Tax 2022 for Businesses: A Complete Guide

“The South Dakota Sales and Use Tax is 4.5%”

What does the South Dakota Sales Tax Mean?

The state of South Dakota relies largely on tax income to help provide essential public services to its inhabitants, such as public safety and transportation, as well as health care and education. All retail sales, including the sale, lease, or rental of tangible personal property or any goods transferred electronically, as well as the sale of services, are subject to the sales tax. The South Dakota sales tax is 4.5% for businesses. Also, there are some conditions that are subject to the South Dakota sales tax. Want to know about it in detail? Read on to grab the knowledge.

South Dakota Sales Tax

Threshold Limit

4.5%

$100,000 in annual sales or 200 separate sales transactions, whichever your business reaches first.

To Whom The South Dakota Sales Tax Apply?

All retail sales, including the sale, lease, or rental of personal property or any product transferred electronically, as well as the sale of services, are subject to the sales tax.

On gross receipts from the sale of a product or service, a business must declare and pay sales tax unless:

  • The buyer issues them an exemption certificate that reads:
  • They make a  purchase with the intention of reselling it;
  • the acquisition is for a tax-exempt purpose; or
  • the sale is to a tax-exempt body, such as the state or local governments of South Dakota;
  • The goods or service is specifically free from taxation under the legislation

Determine the location of sales

Wherever the customer obtains the product or service, sales tax is chargeable. 

  • Products picked up at the seller’s location are subject to the seller’s sales tax.
  • On the delivery of the product, it is subject to sales tax.
  • The seller or a transportation company hired by the consumer may make the delivery.
  • If the delivery takes place at an unknown address, sales tax is chargeable on the basis of the customer’s address.
  • If there is no delivery or customer address on file for products supplied electronically, sales tax is chargeable on the basis of the location where the product is first accessible for transmission by the seller.
  • Products sent outside of South Dakota are not subject to South Dakota sales tax, but they may be subject to the sales tax of the destination state.

Therefore, this is where the South Dakota sales tax applies. However, the question may arise: are there any exemptions allowed in the South Dakota sales tax? Let’s see.

Alan Chen

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By the end of this Strategy Session, you will have a clear understanding of the next steps you can take for your business to take advantage of the tax deductions you are missing out on.

What are the South Dakota Sales Tax Exemptions?

There are four reasons why products and services in South Dakota would be exempt from sales tax.

  • The buyer is a tax-exempt organization.
  • The goods or service is exempt from sales tax in its entirety;
  • The buyer submits the claim for exemption;
  • There will be a delivery of the merchandise to a location outside of South Dakota.

Exempt Entities

Certain entities are exempt from paying South Dakota sales tax or use tax on their purchases under state law. Relief organizations and religious and private schools must apply for exempt status with the agency. The exemption certificate must mention its exemption number. Relief agencies’ exemption numbers begin with a “RA,” while private schools’ exemption numbers begin with an “RS.” the exempt entities are:

  • Government agencies in the United States
  • Tribes of Indians
  • South Dakota’s public or municipal corporations
  • Whether it’s a municipal or volunteer fire department or an ambulance service,
  • The state of South Dakota or public or municipal corporations of South Dakota support public schools, including K-12, universities, and technical institutes.
  • Hospitals that are not for profit
  • Organizations that provide assistance
  • Religious and private schools in South Dakota

Entities listed above may apply to the Department for sales and use tax exemption status by submitting an application.

A charity non-profit organization that devotes all of its resources to the relief of the poor, distressed, or underprivileged and is an exempt organization under Section 501(c)(3) of the Internal Revenue Code may be eligible. Additional requirements include a physical address in South Dakota and the entity’s ability to provide genuine services.

Exemption for Sellers

When a buyer presents a seller a completed exemption certificate at the time of sale, the seller is not required to collect sales tax.

  • Claim exemption for: 
  • Reselling purpose products or services; or 
  • Products or services utilized for an exempt purpose with the exemption certificate.
  • Provide proof that the buyer is a tax-exempt organization.

The buyer can give a “single purchase” certificate for a single transaction or a “blanket certificate” that applies to all qualifying exempt item purchases in the future.

Exemption certificates do not expire until the information on the changes; however, we recommend that you update them every three to four years.

On the exemption certificate, a buyer from a state that does not grant sales tax licenses can use their FEIN, driver’s license number, or state-issued ID number.

A company that buys something for resale but then uses it is accountable for reporting and paying use tax on that item.

Now, you might be wondering how to file the Sales Dakota sales tax return? Let’s see.

File and Pay Your Tax Return

Even if a firm does not make a profit, it needs to file a tax return each reporting period if it didn’t do any business or earn any money.

  • Returns on paper

Businesses that file paper returns receive a tax return and a notice of assessment.

Each reporting period has its own worksheet. If you do not receive a response, it is your responsibility to contact the department. You will not receive a paper return if you file electronically.

  • Amending a Tax Return

If you have an EPath account, you can make changes to your returns at any time.

EPath takes a long time to complete.

Moreover, in case you fail to file the tax return on time, it is subject to penalties.

Are There Any Penalties Chargeable?

 

  • Penalty

There is a penalty of ten percent (.10) of the tax liability if you do not file the return within 30 days of the due month. There is a minimum penalty of $10 even if no tax is payable.

  • Interest

The interest of one percent (.01) per month will be chargeable on any past due tax until you pay it in full. (You need to pay the interest for the first month in full.)

Need Assistance for South Dakota Sales Tax?

At Freecashflow.io, we specialize in assisting online business owners to solve tax and accounting-related issues. Warner Brothers, EY, and Paramount Pictures are just a few of the multibillion-dollar firms where our colleagues have worked. Freecashflow.io is a trustworthy partner who can assist you with all of your tax and accounting needs. Please contact us!

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