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The South Dakota business climate is top in the nation for companies of all types from start-ups to major operations. Our state’s limited business taxes and costs give businesses a competitive edge by helping them keep the money they make so they can continue to invest in their company’s growth.
South Dakota business owners benefit from:
Learn more about the most common business costs and taxes that new and expanding entrepreneurs experience in South Dakota below.
Sales tax in South Dakota is a combination of a 4.5 percent state tax and a general, municipal (city) tax, which varies from zero to two percent. Any business, organization or person engaged in retail sales, including the selling, leasing and renting of tangible personal property, products transferred electronically, or the sale of services (as long as they are not specifically intended for resale) is required to obtain a sales tax license and collect and remit the applicable tax.
Motor vehicles are not subject to state and local sales taxes. They are subject to a four percent motor vehicle tax on the purchase price.
Municipal Sales Tax
Most cities and towns in South Dakota have a local sales tax in addition to the state tax. The amount of the municipal tax varies from city to city. Generally speaking, gross receipts that are subject to the state tax are also subject to the municipal tax. Municipal taxes are collected by the Department of Revenue. One tax return takes care of both state and local sales taxes.
Cities can also impose a one percent municipal gross receipt tax on lodging (hotels) restaurant meals and alcoholic drinks.
Use tax applies when sales tax has not been paid on goods or services that are taxable in South Dakota. The use tax rate is the same as the sales tax rate, both for the state and the municipalities.
Local real property taxes in South Dakota vary from one to three percent of the market value of the structure, with most rates falling around two percent. However, five-year property tax abatements are available on new structures or additions to existing ones.
County commissions may, at their discretion, forgive from zero percent to 100 percent of the property taxes on a new structure or an addition to an existing one. This abatement may be available on all industrial, commercial and non-residential agricultural structures with a value over $30,000. The property tax liability after construction cannot be less than the tax liability prior to construction.
Real property taxes are determined by multiplying the market value of the property, reduced by the local equalization factor, times the local mill levy.
Employers in South Dakota pay unemployment tax on the first $15,000 in wages paid to each employee during a calendar year. In 2018, the average unemployment tax rate paid by experienced employers is 1.10 percent.
For new employers (excepting construction firms) the first-year rate is 1.75 percent. The second and third year rates will not increase above the 1.75 percent ceiling and may be reduced to 1.55 percent if the employer maintains a positive account balance.
New Construction firms pay 6.55 percent of the taxable wage base for the first year, then 3.55 percent the next two years if the employer maintains a positive account balance.
For all employers, rates are based on experience, and decrease over time if the employer maintains a positive account balance.
The South Dakota Unemployment Tax/Insurance program is administered by the Unemployment Insurance Division of the Department of Labor.
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