Message from the Secretary
Season Greetings from the Department of Revenue! I hope you all were able to spend the holidays with friends and family. As we enter into the 2015 calendar, the Department continues to expand our capabilites in all areas to meet the needs of our customers.
The Department has enhanced and initiated new filing capabilities through EPath and with communication.
In 2015, one of the Department's main innovations will be the first vehicle license plate issuance since 2006. Throughout this process, the Department will continue to look at ways to incorporate and enhance technology so that it is available to customers.
Enhancing our electronic filing capabilities through EPath is something that we continue to expand. Now taxpayers have the option to pay by credit card. Establishing a new credit card option to pay your taxes makes it more accessible and convenient for our customers. Taxpayers may now use Visa, MasterCard, or Discover to pay sales and use tax, contractors' excise tax, motor fuel tax and bank franchise taxes. Payments can be made by using your EPath account.
I hope you enjoy this edition of our newsletter and wish you all the best in 2015!
The municipal tax changes that will take effect next January 1st:
- Veblen is increasing its 1 percent general sales and use tax rate to 2 percent.
- Colome is imposing a 1 percent municipal gross receipts tax rate on lodging, eating establishments, alcoholic beverages, and ticket sales or admissions to places of amusement, athletic and cultural events. This tax is in addition to their 2 percent general sales and use tax rate.
- Hurley is imposing a 1 percent municipal gross receipts tax rate on lodging, eating establishments, alcoholic beverages, and ticket sales or admissions to places of amusement, athletic and cultural events. This tax is in addition to their 2 percent general sales and use tax rate.
- Miller is imposing a 1 percent municipal gross receipts tax rate on lodging, eating establishments and alcoholic beverages. This tax is in addition to their 2 percent general sales and use tax rate.
South Dakota municipalities are able to implement new tax rates or change existing tax rates on January 1st or July 1st each year.
The South Dakota Department of Revenue has Municipal Tax Information Bulletins available listing all municipal sales and use tax rates statewide as well as information on tribal sales, use, and excise taxes. Updated bulletins are free of charge and available by contacting the Department of Revenue at 1-800-829-9188 or by downloading a copy from the Department’s website, scroll over “Taxes” and select “Business Taxes”, followed by “Publications” and then select “Municipal Tax”.
As the weather gets colder and the Holidays draw to a close, some businesses pick up seasonal work to fill in the gaps from regular sales. Even if your regular business transactions are exempt, any merchandise you have available for sale to customers is likely subject to sales tax. If you add a service or product to your business offering, be sure to call the Department to ask how it is taxed. Some examples of items and services you may have overlooked as being taxable are:
Snow removal services: Are you are using your idle Bobcat to remove snow for other businesses this winter? If so, you should be collecting and remitting state and city sales tax on your fees. If you are a contractor who normally reports excise taxes, you can report the state sales tax on line 6 and the in the city/special jurisdiction section of your excise tax return.
Vending machines: If you have a vending machine for customers or employees at your place of business, these sales are subject to state and city sales tax. If another company owns or services the machine, they may be responsible for the tax depending on your contract. Any commission you receive for the vending machine is not subject to sales tax. If you own and service the machine, or if you are responsible for reporting the tax under your contract, the tax can be backed out of the total vending sales by dividing the gross sales by 1 + the applicable tax rate. Items to be sold in a vending machine can be purchased exempt from tax using an exemption certificate.
ATM machines: The fees charged for the use of an ATM machine are subject to sales tax, unless the fee is charged by a bank. Your contract with the processing company determines if you owe the sales tax or the processing company owes the sales tax. If the processing company charges the customer a fee and pays you a portion of that fee as a commission, the processing company owes the sales tax. However, if you charge the customer a fee and you pay a portion of that fee to the processing company for their services, then you owe the sales tax.
In audits we sometimes run into businesses that didn’t know their new endeavor had different tax treatment than their regular offerings, which can prove to be an expensive mistake. When adding a new offering or changing your existing sales and services, it is a good idea to contact the Department to learn the tax treatment for those items. Call us toll free at 1-800-829-9188, e-mail us at email@example.com, or visit any one of our seven locations to find out more.
Taxpayers may use Visa, MasterCard or Discover to pay sales and use tax, contractors’ excise tax, motor fuel tax, bank franchise taxes or the 911 Surcharge. A 2.45 percent convenience fee is charged on each credit card payment.
Payments can be made by using your EPath account. If you do not have an EPath account, you can use the “Make a Payment” option.
Access EPath and “Make a Payment” at http://dor.sd.gov/ under E-Services on the homepage.
Taxpayers that file and pay their sales tax electronically using EPath receive a collection allowance of 1.5 percent of the tax due, not to exceed $70, each reporting period. No allowances are given on contractors’ excise tax returns or if you have a past tax due.
For more information on credit card payments or to pay by phone, contact the South Dakota Department of Revenue at 1.800.829.9188.
As 2014 came to a close, South Dakota continued to watch the movement of the Marketplace Fairness Act (MFA) and the Internet Tax Freedom Act (ITFA) in Congress. Both pieces of legislation would impact South Dakota sales tax collections.
Nationwide, internet purchases continue to increase at a current annual rate of 15%. This translates to lost sales tax revenue on purchases from businesses that do not collect South Dakota’s sales tax. The MFA would aid in the collection of these revenues by requiring sellers (who meet certain criteria) to collect the tax due on sales into the state. Without the passage of this legislation, internet sellers will continue to have an unfair advantage over in-state businesses.
While the MFA passed the Senate in May 2013 it failed to move out of the House Judiciary Committee and has therefore died. South Dakota, along with other sales tax states, is hopeful that congress will act on new legislation before the end of this new session.
The second piece of federal legislation affecting our state is ITFA. This piece of legislation, if passed, would end our state’s ability tax the charge you pay for internet access. If that were to occur, the impact would be approximately $9 million in annual state and city sales tax losses. Before the end of 2014, Congress did grant an extension of the current moratorium to October 1, 2015. We are hopeful the moratorium will be made permanent allowing South Dakota to continue taxing these services.
Ask the majority of South Dakotans who Neal Wanless is and they’ll tell you the rural Mission man was the winner of the largest lotto jackpot in South Dakota history. Ask the same group what the money Neal spent to buy his winning ticket was used for and the answer probably won’t come as easily, if you get an answer at all. So when you purchase or play South Dakota Lottery products, where DOES the money go?
Revenue from each of the three types of lottery products is designated for specific purposes.
All monies from the sale of scratch tickets are transferred to the state General Fund, nearly half of which supports local K-12 schools, state universities and technical institutes.
For lotto tickets, which includes Powerball, Mega Millions, Hot Lotto, MONOPOLY Millionaires’ Club, Wild Card 2 and Dakota Cash, the first $1.4 million goes to the state General Fund. Anything over that is transferred to the Capital Construction Fund. The Capital Construction Fund filters money to the Water and Environment Fund which is used for a variety of projects from drinking water and wastewater improvement to recycling to natural resource development; the Ethanol Fuel Fund to provide annual production payments to qualified South Dakota ethanol producers; and to the State Highway Fund which is used for state highways and bridges.
Revenue generated from video lottery terminals is called Net Machine Income (NMI); it’s calculated by taking the cash put into the machines minus the prizes paid out. NMI is split 50/50 between the State of South Dakota and the licensed operators who own the machines. 49.5% of the state’s share is transferred to the Property Tax Reduction Fund which is used to replace local property tax revenue for K-12 schools and lowers local property tax levies on owner-occupied and agricultural land.
It’s easy to think that people who play the Lottery are only investing in a chance to win a prize for themselves. But every dollar they spend is also an investment in the future of South Dakota and when that happens, we’re all winners. For more information on lottery products and where the money goes, visit http://lottery.sd.gov/
A webinar was held in October to discuss the recent changes to the Fishing & Hunting Services Tax Facts. Topics discussed in that webinar included:
Watch the webinar now!
-Taxable products and services
-Municipal gross receipts tax
-Purchases for resale
-Right to use land to hunt