Message from the Secretary
As we close out fiscal year 2014, the Department of Revenue Sales and Use Tax and Contractors’ Excise Tax reporting figures are showing a slight increase over the previous year. South Dakota continues to report stable, solid revenue collections as we look for ways to encourage and expand economic development in all communities throughout our great state.
For fiscal year 2015, the Department will continue with its efforts of promoting voluntary tax compliance through education, technological advancement as well as physical presence. Our educational opportunities continue to grow. The current seminar list is posted on our website and our agents are available to conduct specialized training geared specifically to your particular industry upon request. Contact Education Coordinator Jean Person at 605.773.3311 for more information.
The Department will soon be offering the option of paying by credit card for EPath users. This expansion of acceptable payment options in our online filing system will allow more taxpayers the opportunity to file electronically. More information will be provided on this payment option as it becomes available.
The Department will be on hand at many of the summer events held throughout the state to assist with proper licensing and encourage tax compliance. From the local activities of county fairs and farmers markets to the major events of the annual motorcycle rally and State Fair, Department staff will be available to answer questions or provide guidance on South Dakota’s tax structure and laws. Please visit any of our office locations or call our toll-free taxpayer assistance line (800-829-9188), available Monday through Friday from 8 a.m. to 5 p.m., for tax assistance.
In addition, the Department will be heavily involved in the Legislature’s summer study efforts, providing statistical information and analytical insight to the interim committees. Please read the article entitled Summer Legislative Meetings in this newsletter to learn more about the Department’s role in the summer meetings.
I hope you enjoy this edition of our newsletter and wish you all the best.
The municipal tax changes that will take effect next month include:
- Fairview is imposing a 2 percent general sales and use tax rate.
- Roscoe is increasing its 1 percent general sales and use tax rate to 2 percent.
- Lemmon 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.
- Lennox 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.
- Mobridge is continuing their 1 percent municipal gross receipts tax rate that was set to expire on June 30, 2014 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 after July 1, 2014, 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”.
Upcoming Education Dates
Basic Sales Tax Seminar 9:00 a.m. – 12:00 p.m.
Contractors’ Excise Tax Seminar 1:00 p.m. – 4:00 p.m.
Department of Labor and Regulation, East Conference Room
420 S. Roosevelt
Basic Sales Tax Seminar 9:00 a.m. – 12:00 p.m.
Contractors’ Excise Tax Seminar 1:00 p.m. – 4:00 p.m.
Avera Queen of Peace Hospital, Community Room
525 N. Foster
Motor Fuel Adding More Licenses to EPath
Ethanol Producer and LNG will be able to file their returns on the Epath system July 1st. The July returns due in August will be filed on the Epath and no paper return will be sent. Also, new tax rate of .14 in goes to effect for LNG July 1st, 2014.
Summer Legislative Meetings
At the end of the 2014 Legislative Session, legislators were asked to submit ideas for summer discussion – items of interest for further evaluation with the potential result of draft legislation to be considered in the next legislative period. The Legislative Executive Board voted in favor of three such interim committees to meet during the summer months and defined the scope for each committee at their meeting on April 23. These interim committees are:
- Alcoholic Beverage Shipping and Distribution Committee
- Highway Needs and Financing Committee
- Legislative Planning Committee
The Department of Revenue will play a key role with each committee by providing statistical information, current policy and practices as well as analytical insight on any possible changes discussed.
The Alcoholic Beverage Shipping and Distribution committee is tasked with evaluating the three-tier system of alcohol distribution; exploring the options of intrastate and interstate shipping of alcohol; and discussing possible direct-to-customer wine shipping legislation. Representative Roger Solum is the Chair of the committee with Senator Corey Brown serving as Vice Chair. They held their initial meeting on June 10, which included a presentation on South Dakota’s current alcohol beverage laws by Property and Special Taxes Deputy Director Jason Evans. The committee’s next meeting is scheduled for July 7.
The study scope for the Highway Needs and Financing Committee is to analyze the conditions and financial support needed to maintain, repair and improve the state and local highways, road, and bridges. Chair Mike Vehle (Senator) and Vice Chair Mary Duvall (Representative) led the meeting held on June 17. Division of Motor Vehicles Director Peggy Laurenz presented information on motor vehicle excise tax and motor fuel tax collections, which directly benefit the State Highway Fund, and how these collections are distributed. Department of Transportation Secretary Darin Bergquist provided information on the current state highway system. In July, subcommittee meetings are scheduled to occur in selected areas throughout South Dakota.
The Legislative Planning Committee will conduct a 2-year study of K-12 education, including a review of the education funding formula; the revenue, expenditures, and current accounting practices by school districts; the salary needs, school district budget reserves; and the education funding tax levies. Representative Scott Munsterman is chairing the committee with the assistance of Senator Mike Vehle as Vice Chair. Staff from the Property Tax area will provide information on how property taxes and the current levy system affect education funding. The Bureau of Finance and Management as well as Department of Education will also be involved with the study. An initial meeting was held on June 16.
Along with the summer study meetings, the Department will continue its support of the ongoing Agricultural Land Assessment Task Force. Led by Senator Larry Rhoden, with Representative Justin Cronin as Vice Chair, the first meeting for 2014 of this committee is scheduled for July 22. Although the agenda for this meeting is not posted as of yet, Property Tax staff will be on hand to answer questions on the productivity method used for assessing the value of agricultural land in South Dakota.
Information on meeting schedules, recorded minutes, live audio and any committee documentation for all interim committees are available in the 2014 Interim section of the Legislative Research Council.
Are Non-Profits Exempt from Sales Tax?
“Our organization is a non-profit so we are exempt from tax.” While an organization the Internal Revenue Service has approved as non-profit may be exempt from federal taxes, the IRS non-profit status does not exempt the organization from South Dakota sales and use taxes.
Examples of non-profit organizations that are subject to sales tax, but are often mistaken as being exempt from sales tax are:
- Boy Scouts
- Lions Club
- Sertoma Club
- School Booster Clubs and Foundations
- Chamber of Commerce
When is a Non-Profit exempt from South Dakota sales tax?
The South Dakota Department of Revenue must approve non-profit organizations as a relief agency before the organization can purchase products and services exempt from South Dakota sales tax. A relief agency is an organization which:
- devotes its resources exclusively to the relief of the poor, distressed or underprivileged;
- is recognized as an exempt organization by the IRS under § 501(c)(3); and
- has a physical location in South Dakota.
For information on criteria to be a relief agency and the sales tax exemptions that apply to a relief agency, please read the Relief Agency tax facts available online under Business Tax Publications.
If your organization qualifies as a relief agency, you may apply for approval.
The Department will issue approved relief agencies an exemption number the agency can use to purchase products and services exempt from South Dakota sales tax. The approved agency should provide sellers a completed exemption certificate and their exemption number (i.e., 1234-5678 RA). A Federal Employer Identification Number (FEIN) is not proof of being exempt from sales tax.
You may verify that a relief agency is approved to purchase without sales tax by calling the Department at 1-800-829-9188. A list of approved relief agencies is also available on the department’s website. On the website select Business Tax, Statistics, then Active Relief Agencies.
Lottery Holds First Play It Again Drawing
A new second chance drawing program implemented by the South Dakota Lottery in April will hold its first prize drawing July 1, 2014. Play it Again gives Lottery Players Club members the opportunity to submit certain non-winning tickets online for second chance drawings to win cash and prizes. The drawings are offered for specific scratch ticket games or groups of games; the current eligible game is a $2 scratch ticket called $10K Run. While the $10,000 Grand Prize drawing for the $10K Run promotion is set for Dec. 18, 2014, the July 1 drawing is the first of several “mini drawings” being held throughout the promotion. Five winners will be randomly drawn from among all eligible entries received by midnight June 30 to each win $100 in scratch tickets. Winners will be contacted and announced in early July.
To participate in Play It Again, an individual must be a current Players Club member or join the free club by registering online. In addition to providing basic personal information, members also create a unique password to access the Players Club website. Once on the site, they click on Play It Again to enter numerical information from their non-winning scratch tickets to gain entry into the second chance drawing. Eligible games and prizes will vary from drawing to drawing. Players can enter up to 40 eligible tickets in a 24-hour period. Once the ticket information has been entered into the system, the player is not required to keep the ticket to claim the prize if randomly chosen as the drawing winner.
For more information about Play it Again, visit http://lottery.sd.gov/.
Reporting Change for 911 Emergency Surcharge to Union County
Please make the following change in reporting beginning with your July 2014 return, due in August 2014.
Report all 911 Emergency Surcharges collected from customers with addresses within the city limits of North Sioux City, South Dakota under City of North Sioux City, Union County. These surcharges were previously reported under Union County.
All other 911 Emergency Surcharges collected from customers with addresses in Union County will continue to be reported under Union County.
Updated templates will be available July 1, 2014.
If you have questions please contact the Department of Revenue at 1-800-829-9188.
Changes in Air Transportation Services
The Department has determined the Federal Anti-Head Tax Act (49 United States Code § 40116) of 1973 exempts all gross receipts received for intrastate and interstate air transportation services from South Dakota sales and use taxes. This exemption only applies to the charge for the air transportation service. The service provider is still responsible for sales or use tax on the sale of any taxable product or service.
Who does this affect?
- Aerial sightseeing providers (i.e., airplane, helicopter, balloon, dirigible and blimp rides.)
- Air transportation providers
- Air Ambulance providers
- Any one that provides transportation in Federal Airways
When air transportation service is provided with another taxable service for one nonitemized charge and the transportation charge is not disclosed or identifiable, the entire fee will remain taxable. For example, sky diving lessons are subject to sales tax. If there is a single charge for the lessons and the flight, the entire fee is taxable. If the charge for the flight is separately stated from the lesson fee, then the charge for the flight is not taxable.
Please contact the Department at 1-800-829-9188 if you have any questions.
Transient Vendors: Get the Facts Before You Buy
If you are considering hiring a person to provide repair or construction services, the department advises you to:
- Ask for a price quote, in advance, in writing.
- Question the contractor about a permanent address and telephone number, and do not assume that if the information they provide is local, they are a local business. Transient vendors often have business cards printed with local mailing services or motel addresses and telephone numbers.
- Ask for a list of local references and check them before making a decision.
- Ask if the contractor has worker’s compensation and general liability insurance. If vendors are not properly insured, homeowners may be liable for accidents that occur on their property.
- Be careful about paying for work in advance; before making final payments, make sure transient vendors have paid their local suppliers or you may be held liable for unpaid materials.
- Make sure you are completely satisfied with the work before paying the bill, and do not pay more for the job than originally quoted unless you have given written approval for the additional work or cost.
Out-of-state vendors often travel to South Dakota to sell items like fruit, seafood, meat packages, paintings, magazine subscriptions, rugs, T-shirts, sunglasses, household cleaners, furniture, stuffed animals, and asphalting and roofing services. Asking the right questions when approached by those vendors can help you avoid making a purchase you may regret:
- Question the salesperson about the product, warranties, guarantees, etc.
- Get something in writing with the company’s name, address and phone number.
- Ask to see their current South Dakota tax license. State law requires everyone selling products or services to have a current South Dakota sales or contractors’ excise tax license. To verify if the license is valid, call the Department’s toll-free helpline at (800) 829-9188.
All sellers must provide you with a contract or receipt at the time of sale showing the date, the merchant’s name and address, and a statement informing you of your right to cancel the contract within three days. After proper cancellation, the seller has 10 days to refund your money.
If you have doubts about the vendor or think you may have been the victim of a scam, call your local police department or county sheriff’s office immediately. You can also contact the Attorney General’s Consumer Protection Office at (800) 300-1986 or by email at firstname.lastname@example.org. Be prepared to give as much information as you can about the vendor, including the name of the company and salesperson; company address and telephone number; and make, model and license number (if possible) of the vehicle the vendor was driving. Without tips from the public, law enforcement officials may not be able to catch illegal vendors before they move on to the next community.
For more information on transient vendors, contact the South Dakota Department of Revenue’s toll-free helpline at (800) 829-9188, press “1” for the Business Tax Division.
Gearing Up for the 2014 Sturgis Rally
One of the major events of the summer for South Dakota is the annual Sturgis Rally scheduled for August 4-10. Once limited to the city of Sturgis and the immediate area, the Sturgis Rally now has a significant impact on the entire Black Hills region as well as the entire state.
The Department of Revenue works closely with city and county officials throughout the event in the areas of vendor licensing, tax collection, enforcement and overall compliance. While the Sturgis Rally is scheduled to last one week, Department of Revenue employees work on different elements of the rally all year round. Staff from the areas of Business Tax, Legal Services, Motor Vehicles, Special Taxes and Audits work prior to and during the event to ensure that all vendors are properly licensed and understand South Dakota’s tax laws.
The Department is currently accepting pre-registrations from vendors looking to conduct business at this year’s Sturgis Rally. The deadline to pre-register is July 1. During the rally, Revenue Agents and Auditors license vendors, check inventories, verify sales records, and conduct on site reviews and audits; the Department tries to visit every vendor booth in Meade County and other areas in the Black Hills.
- From July 1 to July 28, you may go to the SD Department of Revenue office in Rapid City at 1520 Haines Ave Ste 3 to pick up your license card and packet.
- Beginning July 29 at 1:00 pm, you will need to go to Sturgis City Hall at 1040 2nd St to pick up your license card and packet. Please review the office hours for the Department of Revenue’s office at Sturgis City Hall.
Opening at 1 p.m. on July 29, the Department will operate a temporary office in Sturgis City Hall to provide direct assistance to those looking to do business during the rally and process tax filings. This office will open daily and remain in operation until 3 p.m. on August 11. Taxes collected by the vendors are to be paid directly to the Department of Revenue according to a schedule of collection days. The first tax collection day is August 6.
Statistics from last year’s rally:
- Department staff logged over 1,600 working hours during the rally (from prep to close – a two week period)
- Total tax revenue was reported at $1,321,746
- Northern Hills (Sturgis and all other communities in Meade and Lawrence counties): $1,065,119
- Southern Hills (Rapid City, Custer, Hill City and Keystone, and other areas in Pennington County): $256,627
- Total vendors licensed: 1,133
- Northern Hills: 965
- Southern Hills: 168
Additional vendor information from the Department of Revenue is available online.
We are starting a new compliance project using IRS data made available to us in accordance with section 6103(d) of the Internal Revenue Code. The department will be focusing specifically on 1099-K data to identify taxpayers with reporting issues. The 1099-K details a business’s credit card receipts for each month of a calendar year. We will compare these receipts to the reporting on corresponding sales tax licenses. If we cannot match your 1099-K to an active taxpayer license, we will follow up with you.
Businesses operating in the state are required to have a sales tax license. It is important to remember that even if all sales are exempt under South Dakota law, you are still responsible for reporting use tax. If you are located in this state, all sales should be reported on your tax return even if they are all exempt. If you have questions about what transactions are subject to sales or use tax, call 1-800-829-9188. If you need to apply for a license to report sales or use tax, you can do so at http://sd.gov/taxapp.