As an e-commerce seller, you will need to collect sales tax in South Dakota if you have:
(1) gross revenue from sales exceeding $100,000 in the previous or current calendar year (economic nexus), or
(2) physical presence in South Dakota (physical nexus).
South Dakota is one of a few states, along with Arizona, Hawaii, and New Mexico, that has enacted a gross receipts tax that is generally broader than a traditional sales tax and imposes a tax obligation on the sale of most services, in addition to sales of tangible personal property. The law is entitled the Retail Sales and Service Act. There is no obligation to pass the tax through to the customer, although most merchants choose to do so. For such merchants, particularly those who are primarily selling tangible personal property, the gross receipts tax operates in much the same way as a more traditional sales tax.
Below, we will highlight some of the basic provisions of South Dakota sales tax law.
What is the tax rate range for South Dakota?
State: South Dakota’s general sales tax rate is 4.5%.
Local: South Dakota localities impose their own sales tax at rates ranging from 0% to 2%. Municipalities may also impose a municipal gross receipts tax up to 1%, but that only applies to certain specialized retailers. What is South Dakota's Sales Tax Rate?
Do you have physical or economic nexus in South Dakota?
Physical nexus. Certain business activities create physical nexus in South Dakota. If you have physical nexus, you are required to collect and remit sales tax on all sales that are shipped to South Dakota. Examples of business activities that can create physical nexus in South Dakota include:
- Both of the following conditions exist:
- The retailer holds a substantial ownership interest in, or is owned in whole or in substantial part by, a retailer maintaining a place of business within this state; and
- The retailer sells the same or a substantially similar line of products as the related retailer in this state and does so under the same or a substantially similar business name, or the instate facility or in-state employee of the related retailer is used to advertise, promote, or facilitate sales by the retailer to a consumer; or
- The retailer holds a substantial ownership interest in, or is owned in whole or in substantial part by, a business that maintains a distribution house, sales house, warehouse, or similar place of business in this state that delivers property sold by the retailer to consumers.
Economic nexus. Remote sellers and marketplace facilitators that have gross revenue from sales exceeding $100,000 in the previous or current calendar year must collect and remit South Dakota sales and use tax on taxable sales. Additional information:
- Gross sales include selling, renting, leasing of tangible personal property, any products transferred electronically, and services.
- If you meet the threshold during the current calendar year, the business is required to become licensed and remit South Dakota sales tax from that point forward.
- Historically, South Dakota also had a “200 transactions” test. Effective July 1, 2023, that test is eliminated by S.B. 30, signed by Governor Noem on February 9, 2023. (We understand the DOR is willing to work with any retailers that met the transaction threshold before the effective date.)
What are examples of sales of taxable items?
- Tangible personal property, unless an exemption applies
- Services, unless an exemption applies
- Digital goods
- Leases and rentals of tangible personal property
- Software as a Service (SaaS)
What are examples of sales of nontaxable/exempt items?
- Prescription drugs
- Agricultural equipment, products and services
Are there any sales tax holidays?
Currently, South Dakota does not have any sales tax holidays.
Is South Dakota a member of the SST (Streamlined Sales Tax)?
Currently, South Dakota is a full member of the Streamlined Sales Tax Governing Board (SSTGB).
How to get a sales tax permit / links to register in South Dakota?
You can register online at:
Streamlined Sales Tax Registration System
South Dakota: Sales Tax Rates By Address
What is South Dakota's Sales Tax Rate?