How do I collect sales tax legally?

How to Collect Sales Tax Legally in South Dakota

Collecting sales tax properly is essential for businesses operating in South Dakota. Follow these steps to ensure compliance and smooth operations.

Register for a Sales Tax License

• Register with the South Dakota Department of Revenue: Before collecting sales tax, obtain a sales tax license through the South Dakota Department of Revenue's online portal.
• Provide business details: You will need your business registration information, federal EIN, and contact details to complete registration.

Understand Your Sales Tax Obligations

• Know taxable goods and services: South Dakota generally taxes tangible personal property and certain services. Verify which of your products or services are taxable.
• Apply the correct tax rate: The statewide base sales tax rate is 4.5%, but local jurisdictions may add additional taxes. Use the combined rate based on the point of sale location.

Collect and Remit Sales Tax

• Include sales tax in customer transactions: Clearly calculate and add the appropriate sales tax amount to customer invoices or receipts.
• Keep accurate records: Maintain detailed records of all sales, taxes collected, and exemptions claimed for bookkeeping and reporting purposes.
• File sales tax returns on time: As of 2026, South Dakota requires regular filing of sales tax returns, typically monthly or quarterly, depending on your sales volume.
• Remit collected taxes: Submit the collected sales tax to the Department of Revenue by the due date to avoid penalties and interest.

Additional Operational Considerations

• Use automation tools: Implement sales tax software or accounting systems that automate tax calculations and reporting to reduce errors.
• Stay updated on tax law changes: South Dakota sales tax rules can change; regularly review Department of Revenue updates to maintain compliance.
• Employee training: Train staff on sales tax collection procedures to ensure consistent and accurate application at the point of sale.