Franchise Tax South Dakota: Everything You Should Know For Your Business



What kind of tax will you owe on South Dakota business income?

Most states tax at least some types of business income. In fact, most states tax at least some portion of business income regardless of where it originated. However, the details of how income from each source is taxed depend in part on its legal structure. For example, some states charge a flat fee per dollar of business income earned while others charge an annual amount based on the business’s net value.

South Dakota does not charge any state income taxes. Banks pay a franchise tax. Businesses must file an Annual Report if they earn more than 500K.

South Dakota and Corporate Taxes

South Dakota doesn’t have a personal or corporate state income tax. In fact, it doesn’t even have a sales tax. Instead, there are taxes imposed on specific activities such as cigarettes, alcohol, gasoline, motor vehicles and telephone calls.

The state does levy a small “use tax” on goods purchased out of state and shipped into the state. However, the use tax applies only to purchases that exceed $100.00. If you buy something worth less than $100.00, you don’t owe any additional taxes.

There is no federal income tax in South Dakota. Income earned within the state is taxed at the individual level.

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If you’re thinking about moving to South Dakota, keep in mind that the cost of living here is high compared to most states. For example, the average home price in Sioux Falls is $188,400. This compares to the national average of $209,900.

Bank Franchise Tax

The state of South Dakota imposes a franchise tax on financial institutions doing business within the state. This includes banks, credit unions, insurance companies, investment firms, money market funds, mutual fund companies, registered investment advisers, and securities brokers. In addition, the state charges a flat fee based on bank size.

There are many exemptions to the tax, including interest paid to lenders, dividends paid on stocks, and payments made to government entities like the federal government, foreign countries, and international organizations.


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Federal Taxes

Personal income tax is paid by individual taxpayers who earn money through employment and self-employment. Income tax is collected by states and sent to Washington D.C., where it is divided among federal agencies.

The Internal Revenue Service collects personal income taxes from individuals who work for employers. This includes employees of small businesses, sole proprietorships, partnerships, corporations, trusts, estates, and government entities.

Taxpayers are required to file IRS Form 1040 every year. The form contains information about how much income the taxpayer earned during the previous calendar year. Taxpayers must report their total taxable income on the front side of the form. They calculate their tax liability on the back side of the form.

States impose state income tax on all resident taxpayers. Residents include both people living within the borders of a particular state and those residing temporarily in another state.

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Residents of some states do not pay state income tax. These states include Alaska, Arizona, Delaware, Florida, Iowa, Kansas, Maine, Maryland, Montana, Nebraska, Nevada, New Hampshire, North Dakota, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia, Wyoming, Guam, Puerto Rico, American Samoa, Virgin Islands, and the District of Columbia.

Income tax rates vary widely across the 50 states. Some states charge no income tax while others levy high rates. For example, California charges 9.3% of adjusted gross income. Other states such as Mississippi, Alabama, Louisiana, Oklahoma, and Kentucky charge lower rates.

Most states require residents to file annual returns. In addition to reporting their income, residents must provide detailed information about their deductions. Many states allow taxpayers to deduct expenses related to education, health care, home ownership, child care, charitable donations, and retirement savings.

Tax Forms

The Internal Revenue Service published its 2018 Form 1040, Schedule A, and 1040A, Schedule B, online Friday. This is the third year in a row that the IRS has made its tax information public.

The agency announced earlier this month that it would make the data publicly accessible because “the vast majority of taxpayers are honest people trying to comply with the law.” However, some critics argue that making tax returns public could lead to identity theft.

South Dakotans may want to check out the state’s tax form, too. If you live outside of the state, you’ll still see what South Dakota residents pay in federal income taxes. But there may be additional taxes you’re liable for in South Dakota.


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Frequently Asked Questions

What taxes do you not pay in South Dakota

1. Sales tax

Sales tax is charged at 6% on everything sold in SD. There is no sales tax on food items, clothing, prescription drugs, medical devices, or services. However, if you buy any of these things, they may have a use tax added to them. Use tax is charged at 4% on anything bought outside of SD. If you purchase something online, it will still be subject to sales tax.

2. Gasoline Tax

The gasoline tax is charged at 15 cents per gallon. You cannot avoid paying gas tax. You only get credit for fuel purchased from certain vendors.

3. Cigarette Tax

The cigarette tax is charged at $0.15 per pack.

4. Vehicle Registration Fee

The vehicle registration fee is charged at $10 annually.

5. Motorcycle License Plate Fees

Motorcycle license plate fees are charged at $25 annually.

6. Property Taxes

Property taxes are assessed based on property value. County assessors determine property values. Property taxes are paid yearly.

7. Income Tax

Income tax is charged at 5%.

Does South Dakota tax retirement income

Yes, South Dakota does not have any state taxes on retirement income. However, living outside of the state, you may still pay federal taxes on your retirement income.

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