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Stay compliant and informed with our South Dakota sales tax guide, which covers everything businesses need to know about compliance, rates, and regulations. Learn how to register for a seller’s permit, which products and services are taxable, and when to file returns to avoid fines and penalties.
Key takeaways
- South Dakota has a base sales tax rate of 4.2%, which applies to all retail sales in the state. Most services are taxable, too.
- Depending on the jurisdiction, vendors serving South Dakota consumers may also need to collect an additional 1-2% in local sales tax.
- Out-of-state vendors must register for a South Dakota sales tax permit if they meet the economic nexus threshold of $100,000 in annual sales within the state.
- Marketplace facilitators are subject to this same threshold and must also register if they complete 200 transactions in South Dakota within a calendar year.
- Software-as-a-service (SaaS), custom software, and digital products are subject to sales tax.
South Dakota has a statewide sales tax rate of 4.2%. Depending on the local jurisdiction, total sales tax rates range from 5.2% to 6.2%.
Most cities and towns in the state impose a local sales tax of 1% to 2%, plus a 1% gross receipts tax on specific services like entertainment and accommodation. Below are some examples:
Sales Tax 101: Certain products and services are subject to sales tax, a consumption tax added to the final price and paid by the consumer. Its value is calculated as a percentage of the total purchase amount and varies by state and local government. For example, South Dakota has a base state sales tax of 4.2%, whereas Tennessee charges a 7% sales tax.
As of today, only five states — Alaska, Delaware, Oregon, New Hampshire, and Montana — don't apply this tax. All others use the revenue from sales tax to fund public programs and services, such as road maintenance, fire departments, libraries, bike lanes, and small business grants.
If you sell tangible personal property, you're required to collect sales tax in every state where your business has established a physical or economic nexus. Since each state has different thresholds and regulations, compliance can be complex. That's where a sales tax automation platform like Numeral can help.
Built for ecommerce and SaaS companies, Numeral makes it easier to meet your tax obligations as you enter new markets. From nexus monitoring to registration, filing, and remittance, our platform can manage every aspect of tax compliance on your behalf.
Recent tax rate changes in South Dakota
- Effective July 1, 2023, South Dakota decreased its statewide sales tax rate from 4.5% to 4.2%. No other recent statewide sales tax changes have occurred. However, local jurisdictions can adjust their rates at any time.
- That same month and year, the Department of Revenue eliminated the 200-transaction threshold for remote sellers. Vendors must now only meet the $100,000 sales threshold (regardless of the number of transactions) to establish economic nexus and be required to collect and remit South Dakota sales tax. This change does not apply to marketplace facilitators, who are still subject to both thresholds: $100,000 in gross sales or 200 separate transactions into South Dakota in a calendar year. Meeting either threshold creates a nexus.
- South Dakota municipalities can introduce new tax rates or adjust existing ones on January 1 or July 1 each year, so it’s important that you stay up-to-date with the latest changes. That’s another area where Numeral can help.
Do I need to collect South Dakota sales tax?
If you sell tangible personal property in South Dakota (even from out of state), you most likely have to collect and remit sales tax. The same applies to businesses offering services like pet care, hair styling, beauty treatments, and car repairs.
Your obligation to charge sales tax depends on whether you have a physical presence in South Dakota and the revenue generated from consumers within this state. If you’re a marketplace facilitator, take into account the total number of in-state transactions in the current or previous calendar year.
Nexus: What it means and how it affects your business
Physical nexus
Physical nexus means your business has a tangible presence in a state, such as brick-and-mortar stores, offices, warehouses, or employees. The same goes if you hold inventory in a third-party warehouse (e.g., an Amazon FBA facility) in that state.
In any of these scenarios, you're required to collect and remit sales tax to the proper authorities. For example, if you have a warehouse in South Dakota, you'll charge sales tax and remit it to the state's Department of Revenue.
Economic nexus
Economic nexus refers to a company's obligation to collect sales tax in a state based solely on its sales activity there. For instance, South Dakota requires vendors to collect and remit sales tax if their annual sales in the state exceed $100,000.
Suppose you run an online store from Nebraska and make $110,000 in sales to South Dakota customers in a given year. This means you have economic nexus in South Dakota — even without an office, employees, or warehouses in the state. For more information, see our guide on how to determine economic nexus with every state where you do business.
TIP: If you’re a marketplace facilitator and exceed $100,000 in gross sales or 200 transactions in South Dakota within a calendar year, you must register for a seller’s permit in the state. Meeting any of these thresholds creates economic nexus — and the tax obligations that come with it.
Is South Dakota’s sales tax destination-based or origin-based?
South Dakota is a destination-based sales tax state, meaning the tax rate depends on the customer’s location.
What’s the difference between destination-based and origin-based sales tax states?
Destination-based states apply sales tax based on where the customer receives your product or service. Origin-based states charge sales tax based on where the seller is located.
Say you operate an online clothing store from Sioux Falls and ship an order to a customer in Rapid City, South Dakota. You must charge the sales tax rate that applies in Rapid City because tax is based on the buyer’s delivery location.
Now, let’s assume you run your business in Austin, Texas, and make a delivery to a customer in Houston. Since Texas is an origin-based state, you’ll charge the Austin sales tax rate.
What's taxable?
Most goods that are considered tangible personal property, as well as certain services, are taxable in South Dakota. Let’s see a few examples.
Which ecommerce goods are taxable?
Do you sell clothing, beauty products, pet food, or other physical goods online? Then you must apply sales tax to the final price. Here are some types of products subject to this requirement:
- Prepared foods and beverages
- Apparel and fashion accessories
- Office supplies
- Computer hardware
- Pet products
- Farm equipment
- Manufacturing equipment
- Home furniture and decor items
- Personal care products
- Car parts
- Cleaning supplies
Is software-as-a-service (SaaS) taxable in South Dakota?
Yes, SaaS and other online software subscriptions are subject to South Dakota sales tax.
Exemptions
Some goods are exempt from sales tax. These include but are not limited to:
- Prescription drugs
- Medical devices
- Farm machinery & equipment
- Livestock used for agricultural purposes
- Seeds, fertilizers, and soil conditioners
- Motor fuel
- Newsprint & ink
- Purchases by religious or private schools
TIP: The sales of products and services to state agencies, public schools, Indian tribes, and volunteer fire or ambulance departments are not taxable. If you sell to any of these entities, ask them to provide an exemption certificate.
Excise taxes in South Dakota
Like most states, South Dakota levies excise taxes on tobacco, alcohol, motor fuel, and other goods. These are separate from the state’s 4.2% sales tax.
- Cigarettes: $1.53 per pack
- Tobacco products: 35% of the wholesale price
- Gasoline: $0.28 per gallon
- Diesel fuel: $0.28 per gallon
- Beer: $0.27 per gallon + 2% wholesale tax
- Wine: $0.93 per gallon (for light wines) + 2% wholesale tax
- Liquor: $3.93 per gallon + 2% wholesale tax
Note that tobacco retailers may purchase merchandise only from state-licensed wholesalers or distributors. They are legally required to register with the South Dakota Department of Revenue and apply for a seller’s permit.
Another aspect to be aware of is that you may not sell recreational marijuana in South Dakota. In 2020, lawmakers proposed a 15% excise tax on this product, but their decision was later ruled unconstitutional by the state’s Supreme Court.
Good to know: South Dakota prohibits the online sale of cigarettes and other tobacco products, except cigars. Failure to comply can result in fines and legal action.
How to register for a South Dakota sales tax permit
You can register for a seller’s permit online via the South Dakota DOR website. Enter your company’s legal name, ownership structure, federal EIN, contact info, start date, NAICS code, products sold, and whether you need tribal tax licenses. This service is free of charge.
Note that you don’t need an account to apply for a sales tax permit online. However, setting up an account is more convenient in the long run, as it gives you access to all applications and documents submitted via the DOR portal.
Selling taxable products nationwide? Then use the Streamlined Sales Tax system to register with multiple states. This option is available to all vendors, including those who already hold a seller’s permit in one or more states.
Once registered, begin charging sales tax (4.2%) plus any applicable municipal taxes on all taxable products shipped to South Dakota addresses. You must file regular sales and use tax returns even for periods without sales.
Carefully document all out-of-state sales and maintain thorough sales records. Detailed invoices, shipping reports, and exemption certificates ensure you can validate any sale claimed as exempt or shipped out of state during a South Dakota sales tax audit.
Good to know: With Numeral, vendors can automatically register for sales tax permits in the states where they have nexus. Submit some basic information about your business, connect your billing system, and activate Autoregister. It’s that simple.
I didn't collect any South Dakota sales tax. Do I still have to submit a return?
Yes, qualifying vendors must file a sales tax return for each reporting period, even if no tax is due.
Filing schedule and due dates
Electronic returns must be filed by the 20th of each month, while electronic payments are due by the 25th. Paper returns and payments are due by the 20th of the reporting month. If a due date falls on a weekend or public holiday, it shifts to the next business day.
Good to know: You can file your returns online via EPath, a free service provided by the state’s DOR, or by mail. A simpler option is to put your filings on autopilot with Numeral. Our platform automatically files and remits the sales tax due, preventing manual errors and ensuring you stay on schedule.
Due dates
The DOR assigns a monthly, quarterly, semi-annual, annual, or seasonal filing frequency based on your sales volume. Listed below are the filing due dates for each reporting period.
Monthly
Quarterly
Annual
Penalties
Late filings or payments incur a 10% penalty fee applied each month after the due date, up to 20% of the tax due. A minimum $10 penalty applies even if you don’t owe tax.
Interest also accrues at 1.25% per month, starting at $5 in the first month you’re late with the payment.
Audit & appeals process
The South Dakota DOR routinely conducts sales and use tax audits on registered businesses to ensure compliance. As part of this process, auditors review your books, records, accounting systems, and previous tax returns.
Audit process
The typical audit timeline is as follows:
- Receive audit notice: The Department of Revenue will notify you that your business has been selected for a sales tax audit. You’ll also be informed about the documents they want to see.
- Gather and organize your records: Prepare relevant documentation, such as accounting records, bank statements, invoices, exemption certificates, or tax returns.
- The auditor reviews your documents: The auditor will examine your records for accuracy and completeness. As part of this process, you may need to explain your internal controls, recordkeeping methods, and how taxability decisions are made.
- Receive the audit findings: Once the audit is over, you will receive preliminary results. These may reveal inconsistencies, errors, or other issues that require your attention.
- Provide additional documentation: The auditor may ask you to clarify discrepancies or submit missing records. Consult a sales tax professional before providing any documentation that may be self-incriminating.
- Receive a Certificate of Assessment: This document shows what the DOR believes you owe, including penalties or interest. Make the payment or appeal the results within 60 days to avoid further penalties and enforced collection actions.
How to appeal the results
If you disagree with the auditor's findings, you may request a hearing within 60 days of receiving the Certificate of Assessment. The Secretary of Revenue will then schedule a meeting where you can present evidence supporting your case.
You can appeal the Secretary’s decision to the circuit court within 30 days. If you are still not satisfied with the outcome, you may reach out to the South Dakota Supreme Court. In either case, having detailed records and experienced legal counsel is critical for successfully demanding post-audit assessments.
South Dakota sales tax FAQs
How do you calculate South Dakota sales tax?
Use this formula to calculate South Dakota sales tax:
(State tax rate + local tax rate) x taxable purchase amount
Say your business sells a taxable product for $100 in Rapid City, where the local sales tax is 2%. The total sales tax will be 6.2%, meaning you would add $6.20 to the product price and charge $106.20.
Total tax rate = 4.2% + 2% = 6.2%
Sales tax collected = $100 × 6.2% = $6.20
Is South Dakota a streamlined sales tax state?
Yes, South Dakota is a full member state of the Streamlined Sales and Use Tax Agreement (SSUTA), meaning it follows a set of rules aimed at simplifying sales tax collection and administration.
For businesses, these rules translate into easier registration through a central system, more uniform tax laws, and clearer regulations concerning sales tax rates, exemptions, and other aspects.
Are groceries taxable in South Dakota?
Yes, groceries and food products are subject to sales tax in South Dakota, except those purchased with SNAP (Supplemental Nutrition Assistance Program) benefits.
Is clothing taxable in South Dakota?
Yes, all clothing and footwear purchases in South Dakota are subject to the full sales tax rate unless specifically exempted.
Are digital products taxable in South Dakota?
Yes, South Dakota charges sales tax on digital products like music, movies, and ebooks delivered electronically or by tangible media. Custom software is taxable, too.
Are services taxable in South Dakota?
Personal services and repair or maintenance services to tangible personal property are subject to the 4.2% sales tax. For example, businesses offering legal assistance, automotive tune-ups, cell phone repair services, or spa treatments must collect and remit sales tax to the South Dakota Department of Revenue.
Professional services like medical and dental are exempt. Also, you’re not required to collect sales tax if you offer educational, agricultural, social, or brokerage services. The same goes for the services provided by travel agents, banks, trucking companies, and certain membership organizations, though exceptions may apply.
Should you collect sales tax on shipping charges?
Whether or not you should collect sales tax on shipping charges depends on what you sell. Here’s what the law says:
- If the products sold are taxable, then delivery and shipping charges are considered part of the sales price and become subject to state and local sales taxes. Any insurance cost charged by the retailer and billed to the customer is included in the gross receipts and, therefore, taxable.
- If an order contains only tax-exempt products, any associated shipping charges are also exempt.
- When a shipment includes both taxable and non-taxable items, sales tax applies only to the part of the delivery fee attributable to the taxable goods.
TIP: List shipping as a separate line item on invoices to avoid confusion. Maintain thorough recordkeeping on taxable vs. exempt sales and corresponding shipping charges.
Do I need a South Dakota seller's permit if I only sell temporarily in the state?
There’s no need to apply for a seller’s permit if you sell at three or fewer events per year. Just make sure you obtain a Special Event Tax Return from the event organizer.
Vendors who attend more than three events in a given year must apply for a permanent seller’s permit and collect sales tax.
Should I apply for a sales tax permit if I’m only a wholesaler?
Yes, you need a seller's permit because wholesale transactions are taxable unless the buyer provides a valid resale certificate. Wholesalers must collect and remit sales tax on sales to end consumers.
Can I get an extension on filing my South Dakota sales tax return?
No, you may not. Filing deadlines are fixed, and the DOR doesn’t grant extensions.
Can I amend a South Dakota sales tax return?
Yes, you can amend a sales tax return as long as you do it within 36 months of the original due date.
Information & contacts
For sales and use tax questions, contact the DOR Taxpayer Assistance Center. You may also consult an accountant or lawyer familiar with South Dakota sales tax laws.
- Authority Name: South Dakota Department of Revenue
- Phone number: 1-800-829-9188
- Website: https://dor.sd.gov/
South Dakota's sales tax system can be confusing, especially for out-of-state vendors who may not know the rules. Additionally, tax laws are constantly changing, making it even harder to stay compliant.
Don’t take unnecessary risks.
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