Sales tax in South Dakota — rates, nexus, and filing

South Dakota is historically significant as the state that won the Wayfair case, but practically it’s a mid-rate, broad-base state with a few notable features: it taxes services broadly and has no income tax, making its sales tax base one of the widest in the country.

Key facts

What makes South Dakota notable

South Dakota v. Wayfair (2018): South Dakota passed a remote seller law in 2016 and sued Wayfair, Overstock, and Newegg to establish that physical presence wasn’t required for economic nexus. The Supreme Court ruled 5-4 in South Dakota’s favor, overturning Quill Corp. v. North Dakota (1992) and opening the door for all states to impose economic nexus.

Broad service taxation: South Dakota has no income tax and funds government primarily through sales tax. As a result, it taxes a broader range of services than most states, including many business services and personal services.

No income tax: South Dakota is one of nine states with no individual income tax. This doesn’t affect sales tax obligations but is relevant context for businesses considering South Dakota operations.

Taxability highlights

Food and groceries: Exempt from the 4.5% state rate. Candy and soft drinks are taxable.

Services: South Dakota taxes many services that most states exempt. This is especially relevant for service businesses with South Dakota customers.

Digital goods and SaaS: Taxable in South Dakota as part of its broad tax base.

Shipping: Generally taxable when the underlying product is taxable.

Marketplace facilitators

Marketplace facilitators collect and remit South Dakota sales tax on third-party sales on their platforms.