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Sales Tax Obligations of Sellers in South Dakota

April 13, 2006

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South Dakota imposes various requirements on sellers doing business in the state. We recommend that you go through the items below to help you with the most frequently asked questions concerning sellers and sales and use tax issues.

Procedure for accepting resale certificates. In South Dakota, exemption certificates must be made on the state Form ST-110 (Certificate of Resale), a substitute form that the Department of Revenue has previously approved, or the Multistate Tax Commission's uniform sales and use tax certificate. The resale exemption certificate must include the following information:

• the signature of the purchaser
• the purchaser's name and address
• the purchaser's sales tax license number
• a description of the types of tangible personal property and services being purchased for resale

Procedure for accepting blanket certificates. As a seller you may accept a blanket certificate if your customer repeatedly purchases the same type of property or service for processing or resale. A blanket exemption certificate may be accepted for a stated period of time, but not more than one year.

Sales and use tax liability for out-of-state mail order and catalogue retailers. South Dakota does not have a statute that specifically taxes out-of-state mail order and catalogue sellers. You will be responsible for paying this tax only if you have physical presence within South Dakota. To determine if you have physical presence, ask yourself the following:

• Do I have retail facilities, a warehouse, or any office space in South Dakota? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
• Do my employees or I enter South Dakota for purposes of taking and transmitting orders from South Dakota? If your employee or independent contractor goes into South Dakota to take or transmit orders, your business may have physical presence in South Dakota. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
• Do my delivery vehicles frequently enter South Dakota for purposes of delivering property? Frequent deliveries in South Dakota by your trucks will give you physical presence in South Dakota.

Sales tax "bracket system." The bracket system may be followed by sellers in computing the sales tax. The 4 percent tax is computed on each dollar and/or fraction of a dollar according to the following table:

Absorbing the tax — using a "no sales tax" advertising strategy to drum up business. In South Dakota a seller may add the tax to the price of the product or service sold. (The law against refunding or offering to refund all or any part of the amount collected, or offering to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser in South Dakota has been repealed.)

Claiming refund for excess tax payments. A claim for recovery of overpaid tax must be filed by a taxpayer on forms prescribed by the Secretary of Revenue within three years from the date the amount was due. A retailer is also allowed to claim a credit for returned goods for the amount of the sale on the sales and use tax return. South Dakota provides for a limited refund of sales taxes paid by any qualified low income resident who is 65 years of age or older and any disabled resident.

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