South Dakota Sales Tax Guide
Chapter 8: Understanding South Dakota sales tax rules for shipping & handling
Are you a South Dakota ecommerce business owner who charges your customers for shipping or delivery charges? If so, you need to understand the rules in order to stay in sales tax compliance. Luckily, South Dakota makes it easy for retailers by issuing clear-cut regulations.
Here’s what you should know about shipping and delivery charges and sales tax in South Dakota.
Is Shipping Taxable in South Dakota?
The South Dakota Department of Revenue says, “A retailer’s charge for delivery and handling of taxable products is subject to the same state and municipal sales tax as the product when delivered in South Dakota.” In other words, if you charge your customers for shipping or delivery of a taxable product, you will have to charge sales tax. But if the item is exempt from sales tax, you should not charge the customer sales tax on the delivery or shipping charges.
The state defines “delivery charges” as charges made by retailers for the preparation and delivery of a product or service to a location the buyer requests. It includes transportation, shipping, postage, handling, crating, packing, delivery surcharges, and fuel.
Impact of Delivery Methods
Retailers are required to charge sales tax on any type of delivery used to get products or services to the buyer. This is true even if a retailer hires an outside transportation company to make the delivery and bills the customer for it. So, if you charge your customers shipping or delivery charges for any of the transportation methods the state uses to define “delivery charges,” you should add sales tax to the charges.
Shipping Tax Exempt Purchases
Sometimes you ship a combination of taxable and exempt products to a customer in the same package. When this happens, the State of South Dakota asks that you only charge sales tax on shipping and handling for the “portion of the delivery charge for the taxable products.” You can do this by calculating the percentage of the shipment that is taxable by either weight or price, and then applying sales tax to that portion.
South Dakota collects sales tax on a state level, local municipal levels, and special jurisdictions set up for five Indian tribes. When asked whether the state or local municipalities ever differ in sales tax collection for exempt products or services, a representative from the South Dakota Department of Revenue said the rules are always uniform.
Finally, according to the representative, “Even if a retailer lists the delivery charges separately on an invoice, or puts it on a completely different invoice, the rules remain same. If the product or service is taxable, you should charge sales tax on the delivery charges, regardless of how it’s invoiced.”