South Dakota’s unemployment insurance tax, officially called Reemployment Assistance tax, is paid entirely by employers on the first $15,000 of each employee’s annual wages, at a rate that ranges from 0% up over 9% depending on your claims history. You file and pay it quarterly with the South Dakota Department of Labor and Regulation. Nothing comes out of employee paychecks, and shifting any of the cost to workers is a crime.1South Dakota Legislature. South Dakota Codified Law 61 – Reemployment Assistance
Who Has to Pay
You become a liable employer once you cross either of two thresholds: paying $1,500 or more in total wages during any single calendar quarter, or employing at least one person for any part of a day during 20 different weeks within a calendar year. The weeks don’t need to be consecutive, and it doesn’t matter whether the same person worked each week.2South Dakota Legislature. South Dakota Codified Law 61-1-4 – Employer Defined
Agricultural and domestic employers have their own thresholds. An agricultural employer becomes liable at $20,000 or more in cash wages during any quarter, or 10 or more workers during 20 different weeks in a calendar year. A domestic employer, meaning someone hiring household staff (and this category also covers local college clubs and fraternity or sorority chapters), becomes liable at $1,000 in cash wages paid during any quarter.3South Dakota Legislature. South Dakota Codified Law 61-1-19 – Certain Domestic Service Included
If you operate across categories, keep them separate. Wages from domestic service and agricultural labor are counted on their own, and neither can be combined with the other to meet the general business threshold.
Once liable, register with the Department of Labor and Regulation using Form 1, the Employer’s Report to Determine Liability.4South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Employer Registration
The Taxable Wage Base
South Dakota taxes only the first $15,000 of each employee’s gross wages per calendar year. That figure has sat at $15,000 since 2015.5South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Frequently Asked Questions Once an employee’s year-to-date wages pass that mark with you, you stop owing contributions on their earnings until the next calendar year. If an employee holds a second job, that other employer tracks the $15,000 limit independently based on what it paid.
What Your Rate Will Be
New Employers
A newly registered employer that hasn’t built a claims history gets a standard rate based on industry. Non-construction employers pay a 1.2% contribution rate in year one. If the account stays positive, that drops to 1.0% in years two and three. Construction employers start at 6.0% in year one and 3.0% in years two and three with a positive balance.6South Dakota Legislature. South Dakota Codified Law 61-5-24 – Initial Contribution Rates for Employers Construction rates run higher because the industry historically generates more claims from project-based hiring and seasonal slowdowns.
Experience Rating After Three Years
After three full years of wage reporting, the state calculates an individualized rate based on your reserve ratio. The ratio divides your account balance by your total taxable payroll over the prior three fiscal years ending June 30. Few claims means a bigger reserve and a lower rate; frequent claims push the rate up.5South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Frequently Asked Questions
The Surcharges Added to Your Base Rate
The total rate on your annual notice is not just the base contribution. Two surcharges apply to the same $15,000 wage base:
- Investment fee of 0.55%, which funds the trust fund that pays benefits.
- Administrative fee of 0.08% for calendar year 2026 and beyond. In 2024 and 2025 this fee was 0.02% and applied only to employers with a reserve ratio below 2.25%.
Neither surcharge is credited to your experience-rating account.5South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Frequently Asked Questions
Voluntary Contributions to Lower Your Rate
If your experience-rated contribution rate is higher than you’d like, you can make a voluntary payment into your account before December 31 to improve the reserve ratio used for next year’s rate. Run the numbers first: a lump-sum voluntary contribution can push you into a lower rate bracket and save more in future quarters than it costs.7South Dakota Department of Labor and Regulation. Reemployment Assistance Employer Handbook
Quarterly Filing Deadlines
South Dakota requires quarterly wage reports and tax payments. Each filing is due by the last day of the month following the end of the quarter: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
The fastest way to file is through the state’s Internet Quarterly Wage Reporting System. Upload wage details, pay electronically, and keep the confirmation receipt as your proof of compliance.8South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Wage Reporting
Penalties If You File or Pay Late
Miss a deadline and three charges run from the due date:
- Late filing penalty of $25 per month, or any fraction of a month, the wage report is overdue.
- Late payment penalty of $25 per month, or fraction, the tax payment remains outstanding.
- Interest of 1.5% per month, or fraction, on the unpaid contribution balance.
The two $25 penalties stack. File and pay two months late and you owe $100 in flat penalties plus interest on the balance.8South Dakota Department of Labor and Regulation. Reemployment Assistance Tax – Wage Reporting Interest goes into the state’s employment security contingency fund, not your experience-rating account.9South Dakota Legislature. South Dakota Codified Laws 61-5-57 – Interest on Unpaid Contributions For prolonged delinquency, the state can place a lien on all real and personal property to recover unpaid contributions, interest, and penalties.10South Dakota Legislature. South Dakota Codified Law 61-5-59
How FUTA Fits In
The state tax is separate from the federal unemployment tax, and you owe both. FUTA is imposed at 6.0% on the first $7,000 of each employee’s wages per year.11Office of the Law Revision Counsel. 26 USC 3301 – Rate of Tax Employers who pay state unemployment taxes on time receive a credit of up to 5.4% against the federal rate, dropping the effective FUTA rate to 0.6%, or about $42 per employee per year.12Internal Revenue Service. Instructions for Form 940 (2025) South Dakota is not a credit reduction state, so you receive the full 5.4% credit as long as state contributions are paid on time. FUTA is reported annually on IRS Form 940, due January 31. If total FUTA liability exceeds $500 in a quarter, deposit it by the end of the month following that quarter rather than waiting for the annual filing.
Never Deduct the Tax from Employee Wages
Shifting any part of this tax to workers is a Class 2 misdemeanor in South Dakota. Any agreement by an employee to pay some or all of an employer’s contributions is void by law, and any employer, officer, or agent who directly or indirectly deducts the tax from wages faces criminal charges.13South Dakota Legislature. South Dakota Codified Law 61-5-36 – Deduction of Contributions from Wages Prohibited Even a voluntary employee agreement has no legal effect.
The Reimbursable Option for Nonprofits and Government Entities
Qualifying nonprofit organizations and political subdivisions can elect reimbursable status instead of paying a percentage-based tax. Under this method, you reimburse the state dollar-for-dollar for any benefits actually paid to your former employees.14South Dakota Legislature. South Dakota Codified Laws 61-5A-9 – Change by Nonprofit Organization or Political Subdivision to Reimbursable Basis
Reimbursable status tends to work for organizations with low turnover whose former employees rarely file claims. Organizations with seasonal staff or heavy turnover are usually safer with the contributory method, which caps annual exposure at a known rate. The election must be filed at least 30 days before the beginning of a taxable year and locks in for a minimum of two years.
If You Buy a Business, You Inherit the Rate
When one business acquires another in South Dakota, the experience-rating account of the prior employer transfers to the successor. You inherit not only the employees but the claims history that drives the tax rate, and the transfer is mandatory to keep employers from shedding a bad rate by restructuring. Knowingly manipulating a transfer to get a lower rate, often called SUTA dumping, is a misdemeanor under state law and violates federal requirements. Penalties reach both the employer and any advisor who helps set up the scheme.15South Dakota Legislature. South Dakota Codified Law 61-5-47 – Violation of Mandatory Transfer Provisions Factor the seller’s rate into any acquisition price.