South Dakota State Tax

Introduction

South Dakota is a state in the Midwestern region of the United States of America. It is the 17th-largest by land and the 5th-least populous among the 50 states. The state is known for its vast prairies, rolling hills, and crystal blue lakes. South Dakota is also a state that has one of the lowest tax burdens in the United States. In this article, we will dive deep into South Dakota’s State Tax, discussing its various types, tax rates, and exemptions.

State Income Tax

South Dakota does not have a state income tax. This means that residents of South Dakota do not need to pay any state income tax on their earnings. This policy makes South Dakota an attractive destination for businesses and individuals who want to minimize their tax liability.

Sales Tax

South Dakota levies a sales tax on most goods and services sold within the state. The sales tax rate is 4.5%. In addition to the state sales tax, some counties and cities in South Dakota levy an additional sales tax that can make the overall sales tax rate higher. For instance, the sales tax rate in Sioux Falls, South Dakota, is 6.5%, whereas, in Rapid City, the rate is 6%.

Because South Dakota does not have a state income tax, the sales tax is a crucial source of revenue for the state government. The revenue generated from the sales tax is used to fund various government programs, such as education, public safety, and infrastructure development.

Use Tax

South Dakota also levies a use tax, which is a tax on goods purchased outside of the state but used within the state. The use tax rate is also 4.5%, which is the same as the sales tax rate. The use tax is applied to goods and services purchased online, over the phone, or through mail order catalogs from out-of-state retailers who do not collect South Dakota sales tax.

For instance, if a South Dakota resident purchases a laptop from an out-of-state online retailer that does not collect South Dakota sales tax, the resident would be required to pay a use tax to the state of South Dakota based on the laptop’s purchase price. The use tax ensures that South Dakota retailers are not at a disadvantage to out-of-state retailers who do not collect South Dakota sales tax.

Property Tax

South Dakota levies property tax on real property, such as land, buildings, and immovable structures. Property tax rates in South Dakota are generally low compared to other states. The average effective property tax rate in South Dakota is 1.32%, which is the 23rd-highest rate in the country.

The proceeds from property taxes are used to fund local government programs such as schools, police and fire departments, and road maintenance. The property tax rate in South Dakota for residential property is 1.196%, which is relatively low compared to other states in the region.

Inheritance and Estate Tax

South Dakota does not levy an inheritance tax or an estate tax. This means that there are no state taxes associated with transferring property or assets after death in South Dakota. This policy makes South Dakota an attractive destination for wealthy individuals who want to minimize their estate planning costs.

Conclusion

South Dakota is a state that has a relatively low tax burden compared to other states in the United States. This is because the state does not levy a state income tax or an estate tax, and the sales and property tax rates are relatively low. The use tax ensures that South Dakota retailers are not at a disadvantage to out-of-state retailers who do not collect South Dakota sales tax.

The revenue generated from the sales tax, property tax, and use tax is used to fund various government programs that are essential for the state’s economic growth and development. South Dakota is a fascinating state that offers a high quality of life and a favorable business environment.

South Dakota’s tax burden, at 7.6% of income is well below the national average of 9.8%.  There is no individual state income tax.  There are however, excise and sales taxes.  There are also property taxes that must be given consideration.

South Dakota state sales – 4%, prescription drugs exempt, local sales tax can add 2.75%.  This is lower than most other states.

South Dakota personal income tax

There are no personal income taxes.

South Dakota excise taxes

Taxes will be assessed on alcohol, tobacco, gasoline and other miscellaneous items, at the discretion of the state.

– $1.53 per package of 20 cigarettes

– $3.93/gallon on spirits

– $.93 per gallon on table wine

– $.27 per gallon of beer

– There is an additional 2% wholesale tax on wines and spirits

– $.24/gallon on gasoline

South Dakota inheritance tax

The inheritance tax was repealed by voters in 2001.  Estate tax is not collected as the federal government no longer provides a federal estate tax credit.

South Dakota payroll taxes

State Disability Insurance – none

State Unemployment Insurance – 0% to 10.33%, wage base is $11,000.  New employer contribution is 1.75%.  New construction employers use 6.55%.

State minimum wage follows federal standards

South Dakota state property tax

As South Dakota does not have personal income taxes, property taxes fund schools and local governments.  The state does not collect property taxes but will conduct assessments for taxation.

Properties are taxed by two or more of the following governments:

– Cities

– Counties

– Townships

– school districts

– water districts

– fire districts

– sanitary sewer districts

Local tax assessors assess properties for taxation and all but schools are capped in the amount they can tax per property.  Property is assessed for 85% of its market value.  The tax cap increases with changes in the consumer price index, as well as new construction on the house.  A county Board of Equalization will hear all complaints regarding assessed taxation.

South Dakota state corporate tax

There is no corporate tax rate in South Dakota.  Companies will be assessed for property taxes.

Exemptions

Needy residents (yearly income under 9,750 for single or $12,750 for household) that are 65 and older may be eligible for a sales tax refund.

Disabled veterans may receive a property tax exemption of up to $100,000 on the assessed value of their house.  The veteran must be totally disabled to receive this exemption

Single homeowners that are 66 or older can receive a refund of 35% of taxes paid if the combined household income is less than $13,250.

Disabled, social security and veteran’s benefits are generally exempt from taxation.