At a glance
- Corporate tax
- None
- Tax on wages
- None
- Sales tax
- 4.2% + municipal (4.5% from Jul 2027)
- Economic nexus
- $100,000 in gross revenue
- Minimum wage
- $11.85/hr
- UI wage base
- $15,000
- New-employer UI rate
- 1.20% + 0.55% investment fee
- Paid leave program
- None
- Annual report
- Anniversary window — $55 online
2026 figures, each explained with its source on the area’s page. On top of the federal baseline.
Setup, in order
Register the corporation
Before doing business in South Dakota — usually the first hireApply to the Secretary of State for a certificate of authority ($750 online) and appoint a South Dakota registered agent.
Register for Reemployment Assistance
When you first pay wages in South DakotaOpen a Reemployment Assistance tax account with the Department of Labor and Regulation.
Report new hires
Within 20 days of each hireReport each new or rehired employee to South Dakota New Hire Reporting.
Arrange workers’ compensation
Before the first employee startsBuy workers’ compensation coverage from a private carrier.
Get a sales tax license
On physical presence, or at $100,000 of South Dakota revenueApply for a sales tax license with the Department of Revenue; SaaS and services are taxable.
The six areas
- AccountingAccounting and state tax in South DakotaSouth Dakota has no corporate income tax, no personal income tax and no gross receipts tax for an ordinary business. Its claim on a startup is sales tax, payroll and the annual report.Corporate income taxNone
- ReceivablesReceivables and sales tax in South DakotaSouth Dakota taxes services and products transferred electronically, SaaS included, at 4.2% plus municipal rates through June 30, 2027. Remote sellers register at $100,000.State sales tax4.2%
- PayablesPayables and contractors in South DakotaNo state 1099s and no contractor withholding. Use tax reaches SaaS and services bought without South Dakota tax, because almost all of them are taxable.State 1099 filingNone
- PayrollPayroll taxes and employer rules in South DakotaNo state withholding and no paid leave program. A new employer pays 1.20% Reemployment Assistance tax plus a 0.55% investment fee on the first $15,000 of wages.State income tax withholdingNone
- ComplianceCompliance and filings in South DakotaRegister for $750, file a $55 annual report around each registration anniversary, and report unclaimed property by Oct 31. There is no income tax return.Foreign certificate of authority$750 online
- AdvisoryAdvisory: credits and decisions in South DakotaNo income tax means no R&D credit, NOL or QSBS question. The planning in South Dakota is about sales tax on services and SaaS.State R&D creditNone
Who you register with
- South Dakota Department of RevenueSales and use tax license and returns
- South Dakota Department of Labor and Regulation (DLR)Reemployment Assistance tax account, new-hire reporting, wage rules
- South Dakota Secretary of StateCertificate of authority and annual report
- South Dakota State Treasurer — Unclaimed PropertyAnnual unclaimed property report
Hiring across the border
An employee who lives in one state and works in another is the most common way a startup ends up registered in two. These are South Dakota’s neighbors.
- NDNorth DakotaLow rates, a state-only workers’ comp fund and a sellable research credit
- MNMinnesota9.8% franchise tax, a new 0.88% Paid Leave premium, and taxable prewritten software
- IAIowaFlat 3.8% wage tax, SaaS exempt for business buyers, and a 15-day new-hire clock
- NENebraskaFlat 4.55% corporate tax, a $15 minimum wage, and sick time from the 11th employee
- WYWyomingNo income taxes at all; a $60 license tax, state-fund workers’ comp and no tax on SaaS
- MTMontanaNo sales tax, a receipts-only income tax, and the only state without at-will employment
Common questions
Does South Dakota tax corporate income?
No. South Dakota taxes neither corporate nor personal income, and it has no gross receipts or margin tax in their place for an ordinary business. Only banks and similar financial institutions pay a bank franchise tax.
Is SaaS taxable in South Dakota?
Yes. South Dakota’s sales tax applies to the sale of all services and to products transferred electronically, unless the law specifically exempts them. SaaS sold to South Dakota customers is taxable, for businesses and consumers alike.
Do we owe use tax on SaaS and services we buy?
Yes, if the vendor didn’t charge South Dakota tax. Because the state taxes services and products transferred electronically, software subscriptions, consulting and other services bought from out-of-state vendors that don’t collect owe use tax, reported on the company’s sales tax return or a use tax return.
What does unemployment insurance cost a new employer?
In the first year, 1.20% Reemployment Assistance tax plus a 0.55% investment fee on the first $15,000 of each employee’s wages — $262.50 per employee at most. Construction employers start at 6.00%.
When is our annual report due?
In a window that opens on the anniversary of the date the corporation registered in South Dakota and closes at the start of the second month after it. The fee is $55 online; a late report adds $55.
Is there a South Dakota R&D credit?
No. With no corporate income tax there is nothing for a research credit to offset, and South Dakota hasn’t created a refundable one. The federal R&D credit and its payroll tax offset are the only research credits a South Dakota company claims.
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- South Dakota Department of Revenue — Sales and Use Tax
- South Dakota Legislature — SDCL 10-45-2 (4.5% effective July 1, 2027)
- South Dakota Department of Revenue
- South Dakota DLR — Reemployment Assistance Tax FAQ
- South Dakota DLR — Reemployment Assistance for Businesses
- South Dakota DLR — Minimum wage increase for Jan. 1, 2026
- South Dakota DLR — Division of Labor and Management
- South Dakota Secretary of State — Filing fees
- South Dakota Secretary of State — Business Services
- South Dakota New Hire Reporting
- South Dakota State Treasurer — Unclaimed Property (holders)
- South Dakota Legislature — SDCL 43-41B-18 (report before November 1)
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.