South Dakota Sales Tax Exemption Form: Who Qualifies and How to File

The South Dakota sales tax exemption form is a free PDF called the Streamlined Sales and Use Tax Agreement Certificate of Exemption, available from the South Dakota Department of Revenue at dor.sd.gov.1South Dakota Department of Revenue. Exemption Certificate You can also request a copy by calling 1-800-829-9188 or emailing bustax@state.sd.us. Fill it out, hand it to the seller at the time of purchase, and the seller has legal cover to skip collecting the 4.2% state sales tax plus any municipal tax that would otherwise apply.2South Dakota Department of Revenue. Municipal Tax The form never goes to the state; the seller keeps it on file.

Who Can Use the Form

The exemption categories come from SDCL 10-45-10 and 10-45-14. They include sales to the United States government, to South Dakota and its public and municipal corporations, to other states that reciprocate, to Indian tribes, to qualifying 501(c)(3) nonprofit charitable organizations, to religious and private educational institutions, and to nonprofit charitable hospitals.3South Dakota Legislature. South Dakota Codified Law 10-45-104South Dakota Legislature. South Dakota Codified Law 10-45 – Retail Sales and Service Tax

Two everyday uses cover most private-sector buyers. Retailers buying inventory for resale check the “Resale” box and enter their state tax license number, because sales tax is meant to hit only the final retail sale. Farmers and ranchers can claim exemptions on seed, commercial fertilizer, pesticides, application equipment rentals, farm machinery, attachment units, and irrigation equipment under the agricultural provisions of Chapter 10-45.4South Dakota Legislature. South Dakota Codified Law 10-45 – Retail Sales and Service Tax

Nonprofit charitable organizations face an extra step. The organization must devote its resources exclusively to helping the poor, distressed, or underprivileged, hold IRS 501(c)(3) status, and operate a physical location in South Dakota where it actually delivers services. Qualifying groups apply to the Department of Revenue for an exemption number, and relief agencies renew that status every five years.5South Dakota Department of Revenue. Sales and Use Tax

One thing to watch: South Dakota taxes services as well as tangible goods, including electronically delivered products.6South Dakota Department of Revenue. Sales and Use Tax If you’re buying services for a resale or agricultural purpose, you still need the certificate. Don’t assume services fall outside the tax because they’re intangible.

How to Fill Out the Certificate

The form has six numbered sections. Complete every field, because a partially filled certificate doesn’t protect the seller and may not protect you.

  1. Purchaser information. Your full legal name, business address, and the state where you’re claiming the exemption.
  2. Reason for exemption. Check one from the list: federal government, state or local government, tribal government, resale, agricultural production, charitable organization, educational organization, and others. Pick the category that matches your legal standing.
  3. Identification number. Enter your South Dakota state tax license number. If you don’t have one, use your Federal Employer Identification Number. If you have neither, a driver’s license or state ID number is acceptable.1South Dakota Department of Revenue. Exemption Certificate
  4. Type of business. Choose the numbered entity type that describes you, from sole proprietor to corporation to nonprofit.
  5. Description of items. Describe what you’re buying and how it connects to the exemption you claimed.
  6. Signature and date. By signing, you declare the information is correct and complete to the best of your knowledge and belief.7South Dakota Legislature. Streamlined Sales and Use Tax Certificate of Exemption

Electronic certificates don’t need a signature under state law, so if you’re sending the form digitally you can leave that field blank.8South Dakota Legislature. South Dakota Codified Law 10-45-61

Single Purchase or Blanket Certificate

You can issue the certificate for one transaction or as a blanket certificate covering all future qualifying purchases from the same seller. A blanket certificate stays in force until you cancel it, with one condition: you have to make at least one purchase from that seller within any 12-consecutive-month period. Go a full year without buying, and the blanket certificate lapses; you’ll need to file a fresh one to resume tax-free purchases.1South Dakota Department of Revenue. Exemption Certificate

South Dakota does not put an expiration date on exemption certificates. As long as the underlying exemption still applies and the purchasing relationship stays active, the certificate remains valid indefinitely.

Giving the Form to the Seller

Hand the completed certificate directly to the seller. Do not send it to the Department of Revenue. Under SDCL 10-45-61, a seller who holds a properly completed exemption certificate is relieved of responsibility for collecting the tax on the items described. The seller can rely on your certificate until you file a new one revoking or changing the exemption.8South Dakota Legislature. South Dakota Codified Law 10-45-61

Four conditions must all be met for the certificate to protect the sale: every field is completed, the certificate is provided at the time of sale, the claimed exemption is actually allowed in the state where the tax would be owed, and the seller isn’t knowingly helping the buyer evade the tax.1South Dakota Department of Revenue. Exemption Certificate The seller must keep the certificate on file for at least three years from the date you provided it and produce it if the Department of Revenue asks.8South Dakota Legislature. South Dakota Codified Law 10-45-61

Penalties for Claiming an Exemption You Don’t Qualify For

If you knowingly file an exemption certificate to buy something tax-free when you know you don’t qualify, and you fail to report the transaction to the Department of Revenue, that’s a Class 1 misdemeanor in South Dakota. The penalty is up to one year in county jail, a fine of up to $2,000, or both.9South Dakota Legislature. South Dakota Codified Law 22-6 The Secretary of Revenue can also add a civil penalty of up to 50% of the tax owed, on top of the tax itself.8South Dakota Legislature. South Dakota Codified Law 10-45-61

Honest mistakes have an exit. If you buy something tax-free and later realize the purchase didn’t actually qualify, report it and pay the use tax on your next return. That voluntary correction avoids both the misdemeanor charge and the civil penalty. The criminal provision targets buyers who act “knowingly” and with “intent to evade,” not someone who made a good-faith error and fixed it.8South Dakota Legislature. South Dakota Codified Law 10-45-61

Using the Same Form in Other States

South Dakota is a full member of the Streamlined Sales Tax Agreement, and the same certificate is accepted across all 23 member states, including Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.10Streamlined Sales Tax Governing Board. Home

Being accepted isn’t the same as being valid. Each member state maintains its own list of exempt categories, and not every reason code carries across borders. The “industrial production/manufacturing” reason code, for example, is not recognized in South Dakota at all.7South Dakota Legislature. Streamlined Sales and Use Tax Certificate of Exemption You are responsible for confirming that the exemption you claim is allowed in the state where the tax would otherwise be owed. Check that state’s rules before assuming your South Dakota exemption transfers.