South Dakota Payroll Tax: Reemployment Assistance, FICA, and Filing

South Dakota payroll taxes are lighter than in most states because there is no state income tax to withhold and no city or municipality imposes a local income or payroll tax.1South Dakota Department of Revenue. Municipal Tax The one state-level tax employers do pay is the reemployment assistance tax, which funds unemployment benefits and comes entirely out of the employer’s pocket. Everything else on a South Dakota paycheck is federal.

No State Income Tax, No Local Payroll Tax

South Dakota does not impose a personal income tax.2South Dakota Department of Revenue. Taxes Employers never withhold state income tax from a paycheck, no matter how much the employee earns. There is no state W-4 equivalent to collect, no state withholding return to file, and no year-end reconciliation. The state also runs no mandatory disability insurance or paid family leave program, so there are no payroll deductions for those either. And because no South Dakota municipality levies an income or payroll tax, your city of operation does not add a layer.

Federal Payroll Taxes You Still Owe

Federal obligations are the same as everywhere else in the country, and with no state income tax in the picture, they are the bulk of what you handle.

  • Federal income tax withholding, based on each employee’s Form W-4 and the IRS withholding tables.
  • Social Security tax at 6.2% from the employer and 6.2% from the employee, on wages up to $184,500 in 2026.3Social Security Administration. Contribution and Benefit Base
  • Medicare tax at 1.45% from each side on all wages, with no cap. Wages above $200,000 trigger an additional 0.9% Medicare surtax that the employer withholds but does not match.
  • Federal Unemployment Tax (FUTA) at a nominal 6.0% on the first $7,000 of each employee’s wages. South Dakota’s unemployment program qualifies for the full 5.4% credit, bringing the effective FUTA rate to 0.6%.4U.S. Department of Labor. FUTA Credit Reductions

The Reemployment Assistance Tax

The reemployment assistance (RA) tax is the state’s unemployment insurance program. The employer pays all of it, and it cannot be deducted from employee wages.5South Dakota Department of Labor and Regulation. Reemployment Assistance Employer Handbook The program is governed by South Dakota Codified Laws Title 61.6South Dakota Legislature. South Dakota Codified Laws 61 – Reemployment Assistance

Who Has to Pay

You become liable for the RA tax if you meet any one of these thresholds:7South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Frequently Asked Questions

  • General employers: paid $1,500 or more in wages in any calendar quarter, or employed at least one person in 20 different calendar weeks, in the current or preceding year.
  • Agricultural employers: paid $20,000 or more in wages in any calendar quarter, or employed 10 or more workers for any part of a day in 20 different weeks.
  • Domestic employers: paid $1,000 or more in wages in any calendar quarter.
  • 501(c)(3) nonprofits: employed four or more individuals in 20 different calendar weeks.
  • Successor employers: acquired all or part of a business already covered.

If you are already covered under FUTA or another state’s unemployment law, South Dakota treats you as liable here too.

What Wages Are Taxed

The RA tax applies only to the first $15,000 of each employee’s annual wages, a figure that has held steady since 2015.8South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Wage Reporting Once an employee crosses that mark for the year, you owe no more RA tax on their earnings until January.

Rates for New Employers

Your rate is built from three pieces: the base RA tax rate, an investment fee, and an administrative fee. New employers without a claims history pay the following combined rates for 2026:7South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Frequently Asked Questions

  • Year 1: 1.20% RA tax, plus a 6.00% investment fee, plus the administrative fee.
  • Years 2 and 3: 1.00% RA tax, plus a 3.00% investment fee, plus the administrative fee.

The administrative fee for 2026 and beyond is 0.08%, so a first-year employer pays roughly 7.28% on the first $15,000 per employee. The investment fee is by far the largest component, and it drops sharply after year one.

Rates After Three Years

Once you have three full years of wage reporting, the state assigns you an experience-based rate reflecting your actual claims history, recalculated each year from your reserve ratio under SDCL 61-5. Few or no claims against your account means a lower rate; heavy claims means a higher one. A delinquent account disqualifies you from receiving a reduced experience rate, which over time can cost more than any late penalty.

Registering as an Employer

Before paying any wages, get a Federal Employer Identification Number from the IRS and register with the South Dakota Department of Labor and Regulation’s Reemployment Assistance Tax Unit.9South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Employer Registration The application covers your business structure and the date wages first went out. Once it is processed, the state issues an account number used on every quarterly filing.

Keep payroll records for each employee showing gross wages, the taxable portion up to the $15,000 base, and hours worked. State law requires those records to be retained for at least four years and made available for inspection.10South Dakota Legislature. South Dakota Codified Laws 61-3 – Administration and Enforcement

Quarterly Filing and Payment

Employers file the Quarterly Contribution and Wage Report through the state’s Reemployment Assistance online portal, listing wages by employee Social Security number. Deadlines are:8South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Wage Reporting

  • Q1 (January–March): due April 30
  • Q2 (April–June): due July 31
  • Q3 (July–September): due October 31
  • Q4 (October–December): due January 31

Payment can be made through the portal by ACH debit or ACH credit transfer. A payment voucher option is also available if you prefer to mail a check.

Penalties for Late Filing or Payment

Missing a quarterly deadline triggers three penalties that run at the same time:8South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Wage Reporting

  • Late filing penalty of $25 per month or any fraction of a month past the due date.
  • Late payment penalty of an additional $25 per month or fraction of a month.
  • Interest at 1.5% per month on the unpaid balance from the due date.

Staying delinquent also blocks you from receiving a reduced experience rate in future years.

Classify Workers Carefully

The RA tax applies to employees, not independent contractors. Misclassify someone the state later deems an employee, and you owe back taxes plus penalties and interest.

South Dakota uses a “right to control” test rather than the ABC test some other states follow. The most important factor is whether the hiring party controls how the work is done, not just the end result. Other factors include who provides tools and materials, how the worker is paid (hourly or salary versus a flat project fee), whether the worker can hire their own helpers, and who controls the worksite.11South Dakota Legislature. Administrative Rule 64:06:02:07.01

No single factor decides the question, but control over the manner of work carries the most weight. A worker who sets their own schedule, supplies their own equipment, and invoices a flat fee for completed projects looks like a contractor. A worker who shows up at your location on a set schedule, uses your tools, and follows your procedures looks like an employee, regardless of what the contract calls them.

New Hire Reporting

Every employer must report each newly hired or rehired employee to the South Dakota New Hire Reporting Center within 20 days of the first day of work. The requirement covers all employees, including part-time, temporary, and seasonal staff.12South Dakota Department of Labor and Regulation. Employer’s Guide New Hire Reporting Independent contractors do not need to be reported.13South Dakota Department of Labor and Regulation. New Hire Reporting

Each report lists the employee’s Social Security number, full legal name, and mailing address, along with the employer’s name, address, and Federal Employer Identification Number.12South Dakota Department of Labor and Regulation. Employer’s Guide New Hire Reporting The data is used mainly for child support enforcement and to catch fraudulent unemployment claims.

A Note on Workers’ Compensation

Workers’ compensation insurance is not a payroll tax, but employers often assume it is required and lump it in. South Dakota does not legally require employers to carry workers’ compensation coverage.14South Dakota Department of Labor and Regulation. Workers’ Compensation An uninsured employer, however, can be sued directly in civil court if an employee is injured on the job, with damages potentially well above what a policy would have covered. Coverage is available through private insurers, or you can apply to self-insure if you can show the financial resources to back it up.