Avalara Taxrates > Blog > Sales Tax News > South Dakota: Get Exemption Certificates Right - Avalara

South Dakota: Get Exemption Certificates Right


 Document tax exemptions properly in all states.

Sales tax exemptions occur for one of several reasons: The product or service may be specifically exempt by state law; the product or service may be exempt for a specific purpose; or the buyer may be exempt. Different situations may require different types of validation.

The South Dakota Department of Revenue explains what sellers need to do to properly document an exempt sale in situations where the good or service is not specifically exempt.

Exemption certificate

Sellers must charge sales tax unless the buyer presents the seller with a properly completed sales tax exemption certificate. Once obtained, the exemption certificate must be maintained for a period of at least three years.

Buyers who make recurring exempt purchases from a seller may remit a blanket exemption certificate, provided the reason for the exemption is the same. “A blanket certificate continues in force until canceled by the purchaser.” It is the responsibility of the buyer to assure that his/her purchases “are of a type covered by the exemption certificate.”

Sellers in possession of a properly completed exemption certificate are not responsible for collecting and remitting South Dakota sales tax on covered purchases provided all of the following conditions are met:

  1. “All fields on the exemption certificate are completed by the purchaser.
  2. The fully completed exemption certificate is provided at the time of sale.
  3. The state that is due the tax on the sale allows the exemption reason.
  4. The seller does not fraudulently fail to collect the tax due or solicit customers to unlawfully claim an exemption.”

South Dakota, a member of the SST member states may request copies of the certification South Dakota sellers use to document exempt sales.

Sellers doing business in non SSUTA member states “must obtain documentation to support exempt transactions as required by that state.”

Reasons for an exemption

Exemption certificates must identify the reason for the sales tax exemption (along with other information). Valid exempt sales include the following:

  • Sales to the federal government and its agencies.
  • Sales to South Dakota and local governments.
  • Sales to Indian tribes.
  • Sales to foreign diplomats.
  • Sales to charitable organizations.
  • Sales to private or religious education organizations.
  • Sales for resale.

Additional valid reasons for a seller to exempt a sale include the following:

  • Agricultural exemptions.
  • Direct pay permit purchases.
  • Direct mail.

The South Dakota Department of Revenue Tax Facts provides detailed information about each of the above, as well as a South Dakota Streamlined Sales and Use Tax Agreement Certificate of Exemption (and instructions).

Read the sales tax exemption certificate survival guide.

 

photo credit: woody1778a via photopin cc


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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.