Taxation in South Dakota

Updated on Monday 28th January 2019

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From the beginning, we mention that South Dakota is the most income-tax friendly state in America because there is are no personal and corporate income taxes imposed. However, it is good to know that there are other business taxes imposed for financial companies in South Dakota. We kindly invite you to get in touch with our team of company formation specialists in USA and discuss the ways in which we can provide help for opening a company in South Dakota. We can also offer information about the taxation regime and the exemptions for a business established in this American state.
 

What are the tax exemptions in South Dakota?
 

South Dakota is subject to the same tax exemptions as Ohio, Nevada, Washington, Wyoming, and Texas, meaning that there is no corporate income tax imposed on businesses and no personal income tax. There is no privilege tax and no franchise tax imposed in the state of South Dakota. This is why South Dakota, alongside the above-mentioned states, is considered a tax-friendly state. Having no corporate tax imposed on businesses in South Dakota lets foreign entrepreneurs decide on future investments in the firm. However, if you decide to open a company in South Dakota and activate in the financial sector, it is necessary to pay attention to the bank franchise tax.
 

What is the bank franchise tax in South Dakota?

 
The bank franchise tax in South Dakota is imposed on profits of financial companies with activities in this American state. This kind of tax is applicable to the net income of the financial company and assessed at a series of marginal rates. For example, a tax rate of 6% is applicable to incomes of $400 million or less. As for generated incomes of more than $1.2 billion, the bank franchise tax rate is set at 0.25%. It is good to know that a minimum tax of $200 is imposed per each financial business location in South Dakota. However, if your financial companies have branches in other American states, it is best to observe the taxation structure in those states.
 

Multistate business and nexus for company owners in South Dakota

 
Even if you do not need to pay taxes in South Dakota, it is important to know that taxes have to be paid in other American states if you have companies established there. In other words, you may have nexus, meaning that if you run companies in other states than South Dakota, you are obliged to pay the taxes applicable in that states. Instead of dealing with misunderstandings in matters of taxation, it is important to consider the support and services of an accounting firm in South Dakota or in any other American state. An experienced accountant can take care of the daily financial activities in the firm like making payments, handling the bookkeeping and payroll and provide support for the annual financial statements. Even though you don’t need to pay taxes in South Dakota, the services of an accounting firm are needed in your company, and in this matter, you can get in touch with our team of consultants and find out the ways in which we can provide information and assistance. Also, we invite you to read the general guide to company incorporation in South Dakota and see how you can open a business in this state.
 

What is the sales tax rate in South Dakota?

 
Products and services meant for sale purposes in South Dakota are subject to a standard sales tax of 4.5% rate, one of the lowest in the USA. It is important to know that municipalities in this state can collect their own sales tax not exceeding a 2% rate. The lowest sales tax rate is applicable in the city of Meckling, while the highest one is found in Beresford, South Dakota. Do not hesitate to talk to our team of consultants and find out more details about the sales tax in South Dakota. We can also help you register a company in USA, regardless of the chosen state for business.
 

Other tax facts in South Dakota

 
Even though there is no corporate income tax and no personal income tax imposed in South Dakota, it is important to know information about other taxes in this state, like the property tax which represents the main source of revenue for the local authorities. Here are a few facts about other taxes in South Dakota:
 
  • the average property tax rate is set at 1.32% imposed on properties in South Dakota;
  • the gas tax, the alcohol tax, and the cigarette tax are also significant when deciding on business in South Dakota; 
  • as for the inheritance tax, this is not applicable since 2000;
  • there is no estate tax imposed in South Dakota.
 
We kindly invite you to contact our team of company incorporation agents in USA and ask for complete information about how you can open a company in South Dakota.