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Use Tax and Resale Certificates in South Dakota


 South Dakota businesses may owe use tax on straws.

The January 2014 South Dakota Department of Revenue reminds that use tax is due on items purchased for resale with a resale certificate if they are used by the businesses that purchased them.

The department provides the following example:

A business purchases cups, lids, napkins and straws from the same vendor. “[C]ups and lids can be purchased free of tax for resale with food items while straws and napkins cannot. You should pay use tax on any straws and napkins purchased from a vendor who did not charge you tax.”

Admittedly, the example is a bit unclear. Is the business referenced in the business of selling drinks in cups, with lids? Presumably it is. A business that stocks cups and lids in the staff break room so that employees may drink coffee and tea would presumably have to pay use tax on the cups and lids, as well the napkins and straws.

Use tax exists

Confusion aside, the main point is clear: use tax exists, and it needs to be paid when it’s owed.

The department goes on to explain that it is a class one misdemeanor to knowingly use a resale certificate to evade tax. Improper use of resale certificates is exactly the type of information that audits uncover. If businesses are found to have knowingly avoided paying use tax, “a penalty of up to 50% of the unpaid tax in addition to the tax and interest owed” may be imposed.

An automated sales tax solution helps companies pay the use tax they owe, avoid penalties and interest, and stay on the right side of the law.

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photo credit: Darwin Bell via photopin cc


Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.