South Dakota’s gross receipts taxes are how the state funds itself in place of a personal income tax. The base layer is a 4.2% state sales and use tax on the gross receipts of retail sales, lodging, and most services. Several industry-specific gross receipts taxes stack on top of that base: a 1.5% tourism tax, a 1% municipal gross receipts tax in participating cities, a 2% contractor’s excise tax, a 4% telecommunications tax, and a 4.2% passenger transportation tax. A hotel room in a participating city can carry a combined rate of 6.7% before any additional local sales tax.
What Counts as Gross Receipts
Gross receipts are the total consideration a business receives for selling, leasing, or renting tangible goods, electronically transferred products, or services. That consideration includes cash, credit, property, and services received in exchange, all valued in money. You cannot subtract your cost of goods, materials, labor, transportation, or any other business expense from the total.1South Dakota Legislature. South Dakota Codified Law 10-45-1.14 – Gross Receipts Defined
Delivery and handling charges count as part of gross receipts even when billed on a separate line. If the charge is necessary to complete the sale, it’s taxable.1South Dakota Legislature. South Dakota Codified Law 10-45-1.14 – Gross Receipts Defined
A few things are excluded. Cash discounts, term discounts, and unreimbursed coupon discounts the buyer actually takes at the time of purchase don’t count. Neither does the sale price of merchandise a customer returns for a full refund.2South Dakota Department of Revenue. Gross Receipts
The 4.2% State Sales and Use Tax
The general state sales and use tax rate is 4.2%, applied to gross receipts from retail sales of tangible goods, electronically transferred products, and most services.3South Dakota Department of Revenue. Sales and Use Tax Lodging rentals to transient guests (anyone staying fewer than 28 consecutive days) and admissions to amusement, athletic, or cultural events fall under this same 4.2% rate.4South Dakota Legislature. South Dakota Code 10-45 – Retail Sales and Service Tax Casual lodging rentals of ten or fewer days in a calendar year are exempt.
Industry Taxes That Stack on the Base
Tourism Tax: 1.5%
Visitor-driven businesses pay a 1.5% tourism tax under SDCL Chapter 10-45D, on top of the 4.2% state sales tax. It applies to hotels and other lodging, campgrounds, motor vehicle rentals, recreational equipment rentals, recreational services such as guided tours and outfitters, spectator events, visitor attractions, and other visitor-intensive businesses.5South Dakota Department of Revenue. Tourism Tax Revenue funds tourism marketing and promotion.6South Dakota Legislature. South Dakota Code 10-45D
Municipal Gross Receipts Tax: 1%
Cities that have adopted the municipal gross receipts tax add another 1% inside city limits. The MGRT applies only to four categories: alcoholic beverages; eating establishments, meaning restaurants, snack bars, concession stands, and any business selling prepared food for immediate consumption; lodging rented for fewer than 28 consecutive days; and admissions to movie theaters, bowling alleys, concerts, sports contests, swimming pools, and similar events, including membership fees.7South Dakota Department of Revenue. Municipal Tax Not every city levies it. Where it applies, it stacks on the state sales tax and, for lodging, on the tourism tax as well.
Contractor’s Excise Tax: 2%
Businesses performing construction, installation, or repair work on real property owe a 2% excise tax on their gross receipts. The excise tax itself is included in gross receipts, so the effective bid factor when building the tax into a project cost comes out to 2.041%.8South Dakota Department of Revenue. Contractor’s Excise Tax
The prime contractor remits the tax and must issue a prime contractor’s exemption certificate to every subcontractor on each job, listing the prime’s excise tax license number, project location, and project description. Blanket certificates covering multiple jobs are not allowed. A subcontractor without a valid certificate on file for a specific project is treated as the prime and owes the 2% directly. Qualified utility projects are different: no exemption certificates are issued, and every contractor and subcontractor pays the 2% on their own gross receipts.8South Dakota Department of Revenue. Contractor’s Excise Tax
Telecommunications Tax: 4%
Telecommunications companies pay a 4% gross receipts tax under SDCL Chapter 10-33A on services that originate and terminate within South Dakota. Real and personal property used to furnish those services is exempt from property taxes levied by the state, counties, municipalities, and other political subdivisions.
Passenger Transportation Tax: 4.2%
Intrastate passenger transportation carries a 4.2% gross receipts tax under SDCL 10-45-71. The tax applies only when the passenger both boards and exits within South Dakota, covering ride-hailing services, shuttle companies, charter buses, and similar carriers operating entirely within the state.9South Dakota Legislature. South Dakota Codified Law 10-45-71 – Passenger Transportation Gross Receipts Tax Imposed
How the Layers Add Up
A hotel in Deadwood or Rapid City collects at least 5.7% on each room night (4.2% state sales tax plus 1.5% tourism tax) before any municipal taxes.5South Dakota Department of Revenue. Tourism Tax In a city that has adopted the MGRT, that same room charge carries 4.2% plus 1.5% plus 1%, for a combined 6.7% before any additional local sales tax. A restaurant in a participating city pays 4.2% state sales tax plus 1% MGRT on food sales.7South Dakota Department of Revenue. Municipal Tax
Remote Sellers and Marketplaces
After the 2018 Supreme Court decision in South Dakota v. Wayfair, out-of-state businesses with no physical presence in South Dakota must collect and remit state sales tax once their gross sales into the state exceed $100,000 in the current or previous calendar year. South Dakota does not impose a separate transaction-count threshold.10South Dakota Department of Revenue. Marketplace Provider Bulletin
Marketplace providers that facilitate third-party sales into the state have the same obligation once they cross the threshold. If you sell exclusively through a marketplace that already collects South Dakota tax on your behalf, you generally don’t need a separate license. Sales through your own website or other channels count toward the threshold independently and may require you to register.10South Dakota Department of Revenue. Marketplace Provider Bulletin
Getting Licensed, Filing, and Paying
Every business collecting South Dakota taxes needs a state tax license, obtained through the online Tax License Application on the Department of Revenue’s website.11South Dakota Department of Revenue. Sales and Use Tax The Department assigns a filing frequency based on sales volume; most businesses file monthly.
Returns are due by the 20th of the month following the reporting period. ACH debit payments have a slightly later cutoff, typically the 23rd.12South Dakota Department of Revenue. Calendar All filings and payments run through the Department’s EPath online portal, which handles sales and use tax, contractor’s excise tax, and other state taxes. After you submit and receive a confirmation number, save it. Payment options include ACH debit, ACH credit, and credit card.13South Dakota Department of Revenue. Filing and Paying Taxes Online Help
What Happens If You File or Pay Late
Missing the deadline triggers a penalty of 10% of the tax owed or $10, whichever is greater, if the return isn’t received within 30 days after the month it was due. The $10 minimum applies even when no tax is owed, which catches businesses that assume a zero-liability month means they can skip filing.14South Dakota Department of Revenue. Sales and Use Tax Laws and Regulations
Interest accrues at 1% per month on any unpaid tax balance from the original due date, with a minimum of $5 in interest for the first month.14South Dakota Department of Revenue. Sales and Use Tax Laws and Regulations The Department of Revenue can reduce or eliminate the penalty for reasonable cause, but interest is not waivable in the same way. A $10,000 liability three months past due picks up $300 in interest on top of the $1,000 penalty.15South Dakota Legislature. South Dakota Code 10-59 – Uniform Administration of Certain State Taxes