What Is the Sales Tax in South Dakota?

Sales tax impacts most commercial transactions within South Dakota. This consumption tax is applied to the selling price of goods and certain services, collected by sellers from purchasers, and then remitted to the state. Understanding its application is helpful for residents and businesses. The tax framework combines a statewide rate and additional local taxes, creating varied rates across different jurisdictions.

State and Local Sales Tax Rates

The statewide sales tax rate in South Dakota is 4.2%. This rate is the result of a temporary reduction and is scheduled to return to 4.5% on July 1, 2027. The state rate serves as the base for the total tax a consumer might pay, but it is not the complete picture for many transactions.

Many municipalities in South Dakota levy their own local sales taxes. These local taxes are stacked on top of the state’s 4.2% rate, leading to a higher combined rate. Municipalities can impose a general sales tax of up to 2%. Some jurisdictions also apply a Municipal Gross Receipts Tax (MGRT) of 1% on specific sectors like lodging, restaurants, and amusement events.

This system results in different total sales tax rates depending on the location of the sale. To calculate the tax on a $100 purchase in a city with a 2% local tax, you would add the state rate (4.2%) and the local rate (2%) for a total of 6.2%, resulting in $6.20 of tax. The South Dakota Department of Revenue provides an online rate and boundary database for verifying the exact rates for any specific address.

Taxable Goods and Services

South Dakota’s sales tax base is broad compared to many other states. The tax applies to the retail sale of tangible personal property, which includes everything from vehicles to household furniture, and also extends to the gross receipts from a wide array of services.

The state imposes its sales tax on most services rendered to consumers. This includes professional services, making fees paid to accountants and attorneys taxable. It also covers personal care services, so the cost of a haircut or manicure includes sales tax. Repair services for tangible personal property, such as automotive repairs or appliance servicing, are also subject to the tax.

The tax extends to various other service categories. Admissions to places of amusement, athletic, and cultural events are taxable. This means tickets for movies, concerts, and sporting events will have sales tax applied.

Common Sales Tax Exemptions

While South Dakota’s sales tax is applied broadly, some exemptions exist. Groceries are generally not one of them, and unlike in many states, South Dakota taxes most food items at the full state rate. The only major exception is for food purchased with Supplemental Nutrition Assistance Program (SNAP) benefits.

Other exemptions are available for certain health-related purchases. Prescription drugs sold under a doctor’s order are exempt from sales tax. This exemption also extends to certain medical devices that are purchased for personal use by individuals to assist with physical disabilities or illnesses. Sales made directly to government and certain nonprofit entities may also be exempt, along with many products used in agricultural production.

Understanding South Dakota Use Tax

A complementary tax, known as the use tax, exists to ensure that out-of-state purchases are taxed similarly to in-state purchases. Use tax applies to tangible personal property and services purchased from retailers outside of South Dakota for storage, use, or consumption within the state. This tax is triggered when the out-of-state seller does not collect South Dakota sales tax on the transaction.

The purpose of the use tax is to level the playing field for local businesses that are required to collect sales tax. The use tax rate is the same as the sales tax rate that would have been due if the item had been purchased within South Dakota, including any applicable local rates. An individual is responsible for remitting this tax directly to the Department of Revenue.

For example, if a South Dakota resident buys a piece of furniture online for $1,000 from a company in another state that does not collect South Dakota sales tax, the resident owes use tax on that purchase. The resident would need to calculate the amount due based on their local tax rate and pay it to the state. The Department of Revenue provides an online portal for individuals to remit their use tax liability.

Business Registration and Filing Requirements

Any business planning to make taxable sales in South Dakota must first obtain a sales tax license from the Department of Revenue. To complete the South Dakota Business Tax Application, a business owner will need:

• Federal Employer Identification Number (FEIN)
• The legal business name and any trade names (DBA)
• Physical and mailing addresses
• Detailed information about the owners, partners, or corporate officers

The application can be completed and submitted electronically through the state’s online portal, which is the most efficient method. There is no fee to obtain a South Dakota sales tax license.

Once registered, businesses must adhere to ongoing filing and payment obligations. The Department of Revenue assigns a filing frequency, such as monthly, quarterly, or annually, based on the business’s anticipated volume of tax collections. Businesses are required to file a sales tax return for each period, even if no sales were made. The returns and the corresponding tax payments are submitted electronically through the state’s designated online system.