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Indian Country: Construction Services & Realty Improvement Projects
South Dakota has nine (9) tribes. Five tribes currently have comprehensive tax collection agreements; two tribes have limited agreements; and three tribes do not have agreements that include contractor’s excise tax. It is our recommendation that prior to working within Indian country you contact the tribe to see what requirements they may have for businesses / contractors working within their jurisdictions.
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Tax Collection Agreement Areas
Limited Tax Collection Agreement
Indian Country Not Included in Tax Collection Agreements
Indian Country Project - Request for Exemption
Contact Information
Contractor's Excise Frequently Asked Questions
Tax Collection Agreement Areas
Currently five Indian tribes in South Dakota have comprehensive tax collection agreements with the State that include, but are not limited to sales, use, and contractor’s excise tax. The five Indian tribes with comprehensive tax collection agreements are the Cheyenne River Sioux Tribe, Crow Creek Sioux Tribe, Oglala Sioux Tribe, Rosebud Sioux Tribe and Standing Rock Sioux Tribe. The Special Jurisdiction areas for the five comprehensive tax collection agreements are as follows:
- Cheyenne River Special Jurisdiction: the Cheyenne River Indian Reservation, which is Dewey and Ziebach Counties, excluding a 500 foot strip of land in the northern-most portions of Dewey and Ziebach Counties.
- Crow Creek Special Jurisdiction: the Crow Creek Indian Reservation, which includes portions of Hughes, Hyde, and Buffalo Counties.
- Oglala Special Jurisdiction: the Pine Ridge Indian Reservation, which is Oglala Lakota County, and that portion of Jackson County south of the White River. This Special Jurisdiction also includes the Allen Store in Allen, SD, and the East Wind Casino and Sunrise Housing Development, which is located on the east edge of Martin, SD.
- Rosebud Special Jurisdiction: the Rosebud Indian Reservation, which is Todd County. This Special Jurisdiction also includes certain Indian country defined by 18 U.S.C. § 1151 (b) and (c) in Mellette, Tripp, and portions of Gregory and Lyman Counties controlled by the Rosebud Sioux Tribe.
- Standing Rock Special Jurisdiction: the Standing Rock Indian Reservation, which is Corson County and a 500 foot strip of land in the northern-most portions of Dewey and Ziebach Counties.
Contractor’s Excise Tax is applied to the gross receipts of contractors providing construction services or realty improvements.
- This tax applies to Indian and non-Indian contractors on all projects.
- This 2% rate reflects the Special Jurisdiction contractor’s excise tax and is reported using the applicable Special Jurisdiction excise tax code on the state contractor’s excise tax return.
Contractors owe sales tax or use tax on construction materials used in all construction projects regardless if used in projects for the United States government, the Tribal government, the State of South Dakota, or private persons. Contractors also owe use tax on material furnished to them by an exempt entity, such as the Tribal government or the State of South Dakota.
- Municipal sales tax or use tax may be due if the material is delivered or used in a city that imposes a municipal tax.
- Sales tax or use tax on all material delivered within a Special Jurisdiction is reported using the Special Jurisdiction’s code for sales/use tax.
- If the contractor picks up the material at a location outside the Special Jurisdiction, but within South Dakota, the state sales tax would apply. This would not be reported under the Special Jurisdiction sales/use tax code.
- If the contractor purchases materials at a location outside South Dakota, and the materials are delivered to the contractor within the Special Jurisdiction, the Special Jurisdiction use tax would apply. Credit will be allowed for tax paid to another state.
Limited Tax Collection Agreement
The Sisseton Wahpeton Oyate limited tax collection agreement includes the use tax at only the following locations:
- The Dakota Connection Property — convenience store and gas station located east of Sisseton at the junction of I-29 and HWY 10;
- The Agency Village Property — a convenience store and gas station located in Agency Village (10 miles south of Sisseton);
- The Dakota Sioux Property — convenience store and gas station located northwest of Watertown;
- The Buffalo Lanes Property —a bowling alley located east of Sisseton at the junction of I-29 and HWY 10; and
- Dakota Crossing Grocery Store —a grocery store located east of Sisseton on HWY 10.
The Yankton Sioux Tribe limited tax collection agreement includes the use tax and contractor’s excise tax at only the following locations. Both properties are located on Highway 46, 10 miles west of Wagner, SD, or 3 miles east of Pickstown, SD:
Indian Country Not Included in Tax Collection Agreements
The State of South Dakota does not have sales, use, or contractor’s excise tax collection agreements with the Flandreau Santee Sioux Tribe or the Lower Brule Sioux Tribe. The Sisseton Wahpeton Oyate has a limited agreement that does not include sales or contractor's excise taxes. The Yankton Sioux Tribe has a limited agreement that does not include sales tax, and does not include use tax or contractor’s excise tax in areas not defined in the agreements.
Generally, non-tribal member contractors doing construction services or realty improvements within Indian country that is not included in a tax collection agreement are subject to the state contractor’s excise tax. The state sales tax or use tax also applies to materials purchased for these projects.
- Tribal government or enrolled tribal member contractors providing construction services or realty improvements within Indian country controlled by the contractor’s tribe do not owe state contractor’s excise tax when the Indian country is not included in a tax collection agreement. In those instances, the Tribal government or enrolled tribal member contractor does not owe state use tax on materials when the materials are delivered by a retailer, not licensed by the Department of Revenue, to the contractor within Indian country controlled by the contractor’s tribe.
- A tribal contractor, not licensed by the Department of Revenue, performing a construction service within Indian country controlled by the contractor’s tribe cannot issue a prime contractors’ exemption certificate to subcontractors for the projects within Indian country controlled by the contractor’s tribe. Subcontractors who are not enrolled tribal members are then subject to the state contractor’s excise tax.
Indian Country Project – Request for Exemption
Some construction projects may qualify for an exemption from state contractor’s excise, sales, and use taxes. The prime contractor or project owner may submit an “Indian Country Project—Request for Exemption”. The Department of Revenue will review the project by using a list of qualifying criteria and send back a written response either approving or denying the request for exemption. Contractors who have questions regarding the list of qualifying criteria should contact the department.
If approved, the contractor should provide material suppliers and subcontractors with a copy of the approved Request for Exemption form. The sales tax and use tax exemption for materials only applies to materials incorporated into the project. One requirement for the exemption is that the project be located within Indian country controlled by one of the following Tribes and not included in a tax collection agreement area:
- Lower Brule Sioux Tribe
- Flandreau Santee Sioux Tribe
- Sisseton Wahpeton Oyate
- Yankton Sioux Tribe
Projects which may qualify include:
Contact Information
Before making sales or entering into a contract to provide construction services or realty improvements within Indian country controlled by these Tribes, but not included in the tax collection agreement, you should contact the Tribe to obtain information on taxes the Tribe may impose.
Contractor's Excise Tax Frequently Asked Questions
See what others are asking the Department of Revenue about Contractor's Excise Tax.
Contractors do have to report the value of material furnished by the owner of the construction project, except for qualified utility projects. The fair market value of the owner-furnished material includes sales or use tax on the material.
Contractors also owe state and applicable municipal use tax on all material furnished for a construction project if they do not have documentation showing sales or use tax was paid. Documentation may include a copy of the invoice showing tax or a written statement from the owner that sales or use tax was paid. Contractors will owe use tax on material furnished by a government or other sales tax exempt entity because the government will not have paid sales tax at the time of purchase. Contractor's excise tax and use tax due on owner-furnished material is reported during the reporting period the material is furnished for the contractor’s use.
A person who owns land and builds with the intent of selling the building once it is complete is an operative (speculative) builder and is a prime contractor. This includes new construction or remodeling of existing structures.
This person must have a contractor's excise tax license whether they do the construction themselves or hire someone else. More information is available in the Speculative Builders and the $100,000 Rule Tax Fact (PDF).
Most floor covering sales and installations are subject to sales or use tax, not contractor's excise tax. All other types of flooring, such as ceramic tile, terrazzo work, and epoxy flooring are subject to contractor's excise tax. More information is available in the Flooring Tax Fact (PDF).