Should you collect sales tax in South Dakota?
Sales tax is levied on retail sales to your customers, which includes leasing or renting tangible personal property. However, you will collect the sales tax if you determine the nexus in South Dakota. Nexus is the presence that may come physically or economically.
A physical nexus is typically created when your business has a store, warehouse, or office location in South Dakota. An economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds are based on revenue.
Let’s explore if your business has a Physical nexus in South Dakota.
A physical nexus is integrated when your business is engaged in the following in South Dakota:
- Servicing tangible personal property in South Dakota.
- Maintaining, occupying, or using a place of business or an office in South Dakota.
- Employing or retaining any contractor, including an agent, representative, or salesman, by whatever name called, engaged in activities relating to selling, delivering, installing, or taking business orders.
- Having a stock of goods in South Dakota.
Is it constituting an Economic nexus in South Dakota?
You must comply and register under sales tax rules if you are a remote seller (i.e., doesn’t have a physical presence in the state) and business sales in South Dakota exceed $100,000 during the current or previous calendar year.
You may also refer to the South Dakota Revenue Department advisory to know more about business activities that may create an economic or physical nexus within the state.
How can you Register for Sales tax in South Dakota?
You can apply online to get the sales tax permit in the state.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
- FEIN and Social Security numbers of all officers, partners, or owners.
- Address details (physical and mailing).
- Business incorporation dates in South Dakota.
- Contact information.
- Nature of business.
- Business locations.
Is your product or services liable to Sales tax in South Dakota?
Tangible Property: Sales tax in South Dakota is imposed primarily on the retail sale of tangible personal property, e.g., Furniture, giftware, toys, etc.
Services: Most services are charged to sales tax in South Dakota except otherwise stated. See here for more information.
Digital Product: South Dakota charge sales tax on digital products such as software, streaming services, e-books, etc. Here is what the South Carolina Revenue Department says about digital transactions.
SAAS: SAAS is software that allows users to connect to the cloud and use it over an internet connection. This is taxable in South Dakota . Review the South Dakota Revenue Department advisory.
The state provides certain exemptions from the sales tax levy, such as food for home consumption, prescription drugs, manufacturing equipment, etc. Please click here to see what exemptions are covered.
Click here for the sales tax guide issued by the South Dakota Department of Revenue for detailed instructions on the taxability of products and services. (see page 12)
How should you collect and calculate state taxes in South Dakota?
Collecting and computing accurate sales tax to be remitted to the state may involve stratospheric efforts, especially when you are not in South Dakota, as the sales tax is destination-based in South Dakota, which means you must collect taxes on tangible property sold to buyers based in South Dakota.
Complexities involved where you have a business nexus even if not in the state. Any default may lead to severe concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized sales tax calculator and professional services will simplify your job and lighten your compliance burden.
South Dakota has a base sales tax rate of 4.2%, followed by the local tax rates, which vary based on the cities and municipalities. Click here for the city-wise sales tax rates.
Below is the simple formula you can use to calculate your sales tax collection on each merchandise sold:
Sales Tax collectible = Sale value * (4.2% plus local tax rate)
Do you need to collect sales tax on Shipping Charges?
If non-taxable items are sold, shipping charges associated with such sale are not liable to sales tax. However, when a sale includes taxable and non-taxable items, shipping charges need to be apportioned relatively between the taxable and non-taxable parts of the sale. Accordingly, sales tax applies to the taxable portion of the sale. Here is what the state says on shipping charges.
How should you file sales tax in South Dakota?
E-file: You can file your return online through the South Dakota e-filing portal.
File by mail: You can file the return by mailing the pre-printed return as provided by the department.
Payment of sales tax can also be completed by the online portal above, while check payments are also allowed, which can be mailed to the Department of Revenue, Anderson Building; Mail Stop 5055; Pierre, SD 57501.
Filing frequencies and due dates
Based on your reported sales tax or estimated taxable sales, the state assigns you a filing frequency, which can be Monthly, Bi-monthly, Quarterly, or Semi-annually. According to your filing frequency, the due date for filing sales tax would be the 20th day of the month following the relevant reporting period.
Electronic payments are due by the 25th of the month.
Note: If the due date is a holiday or weekend, the next business day would be considered the final due date. This link will take you to the official South Dakota tax site, where you can see what the state says about sales tax filing due dates.
Are there any fines or penalties for default when filing or paying sales tax?
If you fail to file or pay the sales tax within the due dates, the state levies a penalty of 5% of sales tax subject to a minimum of $10. Simultaneously, interest on non-payment of sales tax is levied at 1% per month, subject to a minimum of $5.
However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates. Please review the South Dakota Revenue Department guidelines for penalties and interest.