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South Dakota welcomes Uber

  • Jul 22, 2016 | Gail Cole

 South Dakota clarifies laws for ride-share services.

Beginning July 1, 2016, there are new rules for transportation network companies (TNCs), such as Uber and Lyft, operating in South Dakota. Municipalities may impose additional requirements than the state.

South Dakota now permits TNCs to operate without commercial license plates, so long as the companies ensure both drivers and customers are protected by insurance policies meeting the new state requirements. Under the new law, before companies can allow a person to be a transportation network company driver and participate in the TNC’s digital network, TNCs must require the person to submit an application that includes the following:

  • The registration for the personal vehicle that will be used
  • Proof of financial responsibility for the personal vehicle of a type and in the amounts required by the TNC

The state is also requiring TNCs to obtain a copy of the driver’s driving record and to conduct or contract out a local and national background check on drivers, as well as a search of the national sex offender registry. Persons failing to meet certain requirements are not permitted to drive for a TNC. Additional details are available in the text of HB 1091.

This is good news for Uber, Lyft, and similar companies hoping to expand into South Dakota. However, because municipalities may impose additional requirements, TNCs are advised to check with city governments before working in a new city. For example, the City of Sioux Falls requires TNCs to pay an annual license fee of $1,500 and obtain a state sales tax license before operating in the city (see city ordinances 124.029 and 124.030).  An Uber subsidiary that reportedly applied for a TNC license in Sioux Falls is still waiting for it, because, according to the city licensing specialist, the company has yet to provide proof of having a sales tax license. Charges for intrastate transportation services are taxable in South Datota.

Getting the sales tax license and being able to work in a state is an important first step for businesses. Having the systems in place to be sales and use tax compliant is equally essential. Learn how sales tax software-as-a-service can help.

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.