What do you need to know about the South Dakota sales tax?

Summary 

What is the sales tax in South Dakota? 

South Dakota imposes a state sales tax on the sale of goods and certain services to fund various public services and infrastructure projects.  

As of July 1, 2023, the base South Dakota state sales tax rate is 4.2%, a reduction from the previous rate of 4.5%. This change was implemented through House Bill 1137 and will remain effective until June 30, 2027​​. 

However, the complexity arises when considering additional local taxes imposed by cities and counties.  

These local taxes vary, meaning that the overall sales tax rate can differ significantly depending on the specific location within the state.  

How do you calculate the South Dakota sales tax by city? 

Calculating the South Dakota sales tax by city involves adding the state base rate of 4.2% to the local city tax rate.  

Here's a table illustrating the South Dakota sales tax rates by city: 

How do you calculate the South Dakota sales tax by county? 

Similar to city taxes, counties in South Dakota may also impose their own sales tax, which is added to the state rate.  

Here's a table showing the maximum combined sales tax rates by county: 

Does South Dakota charge sales tax on services? 

Yes, South Dakota charges sales tax on a variety of services.  

Taxable services include lodging, amusements, and services related to tangible personal property, such as repairs.  

The tax rate applied to these services is the same as the general sales tax rate, which is 4.2% plus any applicable local taxes. 

What services are exempt from sales tax in South Dakota? 

In South Dakota, certain services are exempt from sales tax. These typically include: 

These South Dakota sales tax exemptions help to lower the financial burden on essential and nonprofit services, recognizing their importance to society. 

Other services are exempt from sales tax include: 

A full list of exempt services can be found here. 

Are personal services subject to sales tax in South Dakota? 

Personal services, such as beauty and grooming services, fitness and recreational services, and personal care services, are generally subject to sales tax in South Dakota.  

For instance, haircuts, spa treatments, and fitness club memberships are taxable at the combined sales tax rate, including both state and local taxes. 

However, there are exceptions.  

For example, personal training services provided by independent contractors may be exempt if they meet specific criteria, such as operating under a different business model or classification. Service providers need to verify their tax obligations to ensure compliance. 

Does South Dakota require sales tax for online purchases? 

Yes, South Dakota requires sales tax on online purchases. T 

his regulation came into effect after the landmark 2018 Supreme Court decision in South Dakota v. Wayfair, Inc., which allowed states to require online retailers to collect and remit sales tax, even if they do not have a physical presence in the state. 

The retailer generally has the responsibility for collecting the tax.  

This means that when you purchase goods online from an out-of-state retailer, they are required to charge and remit South Dakota sales tax if they meet the economic nexus threshold, typically defined by a certain number of transactions or a specific sales revenue threshold. 

If a retailer does not collect the sales tax, the consumer is responsible for paying use tax on the purchase. This ensures that all sales, whether online or offline, contribute fairly to state revenue. 

Is there a South Dakota sales tax holiday? 

Sales tax holidays are periods when specific items can be purchased tax-free. Other states typically use them to provide economic relief or stimulate spending during certain times of the year, such as back-to-school shopping periods. 

South Dakota does not currently have a sales tax holiday. The bill to give South Dakotans a “tax holiday” that went into effect on July 1, 2023, and temporarily lowered the state sales tax rate from 4.5% to 4.2%​ does not equate to a traditional sales tax holiday, where specific items can be purchased tax-free during a set period. Instead, it represents a broader, temporary reduction in the overall sales tax rate. 

Get expert financial advice 

While the temporary reduction in the South Dakota state sales tax rate from 4.5% to 4.2% provides some relief, businesses and consumers must stay informed about the varying rates by city and county. Additionally, the taxation of online purchases and the exemptions for essential services add layers of complexity.  

Unbiased will connect you with a financial advisor for expert financial advice to ensure tax compliance and maximize your financial strategy.