Paying South Dakota Use Tax
Do you need to pay South Dakota use tax on that? Use Tax can be a tricky subject, but luckily in South Dakota there are some fairly straightforward rules. Since South Dakota does not have a state income tax, generally most products and services are subject to sales or use tax.
What is use tax? Use tax is calculated on the amount of a purchase, whether for goods or services, paid to a vendor that did not include sales tax on the invoice.. Use tax calculations in South Dakota are based upon where the product or service is being used. For example: Amazon ships office supplies to your business in Black Hawk – since Black Hawk is only “state” taxable, the office products need to be taxed at 4.5%. Another example: you have tools shipped to your home in Black Hawk, but the tools will be used at a worksite in Rapid City – those tools need to be taxed at 6.5%, which includes 2% city tax.
What does this mean for you as a business owner? It means you should check all receipts and invoices received to verify whether or not tax was included. This is particularly true for online purchases. For example, Amazon is supposed to be charging sales tax on all purchases sent to South Dakota addresses, however, that does not mean the process has been completely implemented. Amazon is one of the most commonly used internet vendors, and they may not always charge sales tax.
Which types of products and services should you be looking for? Straight answer: generally all. Unless your business is using a product for resale, or you have a special exemption certificate, all products and services are taxable. Examples: Having your income taxes prepared – the service is taxable. Picking up a load of office supplies from the store down the street – the products are taxable. Renewing a subscription online or via mail – they are taxable. If something was taken out of inventory for use within your business or for personal use – that item is taxable as well.
Anything purchased for use within South Dakota, regardless of whether it was purchased online or in another state, South Dakota sales tax will need to be paid for it. If it doesn’t show tax charged on the invoice, you will need to report it as a use taxable item on your sales tax return. Again, there are exceptions to the rules, but there are very few.
If you have questions on use tax, please refer to our website at www.ktllp.cpa for a couple of reference guides from the state of South Dakota, they are also listed below. You can also contact our Accounting Services Department at Ketel Thorstenson for additional questions.
SD Use Tax Publication https://dor.sd.gov/Taxes/Business_Taxes/Publications/PDFs/Tax%20Facts/Use%20Tax.pdf
SD Use Tax Form and instruction https://state.sd.us/eforms/secure/eforms/E1350V10-UseTaxForm.pdf
Use Tax Rate Finder by Address https://apps.sd.gov/rv25taxmatch/main.aspx