Friday, June 6, 2014

Sales and Use Tax

SALES TAX:  The sales tax rate of 4% applies to the gross receipts of the retail sale, lease, or rental of:

w  tangible personal property
w  products transferred electronically
w  services

POINT OF POSSESSION:  Sales tax applies where the customer receives the product or service.  Products or services delivered to a location outside of South Dakota are not subject to South Dakota sales tax, but may be subject to that state’s tax.  Sales to non-residents are taxable if possession is taken in South Dakota.

GROSS RECEIPTS:  total amount of money or other consideration received for products sold, leased, or rented


w  Taxable and Nontaxable Sales
w  Barters
w  Reimbursable Expenses (except for accountants and attorneys)
w  Delivery charges (shipping, handling, crating, etc.)
w  Special Jurisdiction Sales
w  Lottery Receipts

w  Cost of product or service sold
w  Expenses
w  Charges for services necessary to complete the sale, including delivery charges


w  Credit or trade-in value
w  Fees or other interest for late charges on overdue accounts, no account, or insufficient funds checks
w  Discounts not reimbursed by a 3rd party (may include cash discounts, early payment discounts, or store coupons)

MUNICIPAL TAX:  Cities may impose a tax of up to 2% that applies to all products and services that are subject to the state sales or use tax. Municipal tax applies when a product or service is used, stored, or consumed within a city that imposes a tax.
USE TAX:  The purchaser, or consumer, is responsible for paying use tax.  Use tax applies on all products and services that are used, stored, or consumed in South Dakota when South Dakota’s sales tax has not been paid.  State and municipal use tax rates are the same as the State sales and municipal tax rates. 
Examples of items often assessed use tax include:
w  Computers                                                                        w  Manufacturing Equipment
w  Meals Furnished for Employees                                    w  Donations
w  Promotional Gifts                                                             w  Office Supplies
w  Farm Equipment                                                              w  Leases of Equipment
w  Software and Support                                                     w  Tools
w  Snow Removal                                                                 w  Consulting Services
w  Accounting Services                                                        w  Architectural Services
w  Engineering Services
RECIPROCITY:  Credit is allowed for sales or use tax legally due and paid on a product or service in another state against the amount of tax due in South Dakota if the other state provides a like credit.
w  If the tax paid is the same or more than the South Dakota state and municipal tax due, no
additional tax is due in South Dakota.
w  If the tax paid to another state is less than the South Dakota state and municipal tax, the difference in the tax must be paid to South Dakota.
Example:  A computer is purchased and picked up in Nebraska for use by a Sioux Falls business.  The Nebraska store is paid $527.50 ($500 + 5.5% Nebraska sales tax).  Because the South Dakota state plus the Sioux Falls municipal tax is 6%, the difference of $2.50 must be paid to South Dakota.