Key figures
No income tax at all
South Dakota levies no corporate income tax, no personal income tax and no gross receipts tax on ordinary businesses. There is no South Dakota return built from federal taxable income, so Section 174, bonus depreciation, NOLs and apportionment don’t arise here. The only entity-level income-based tax is the bank franchise tax on financial institutions.
What reaches the books
With no income tax, South Dakota adds nothing to the ASC 740 provision. Its costs land elsewhere: sales tax collected from customers sits on the balance sheet as a liability until it is remitted; Reemployment Assistance tax is a payroll cost; and the Secretary of State’s annual report fee is an ordinary expense.
Because South Dakota taxes almost every service and electronically delivered product, the sales tax liability account is where a South Dakota customer base shows up. It needs reconciling to the returns every period like any other liability.
An example
A Delaware SaaS company with one employee in Sioux Falls and $300,000 a year from South Dakota customers owes no income tax to South Dakota. It does owe sales tax on those subscriptions — collected from customers at 4.2% plus the municipal rate — Reemployment Assistance tax on the employee’s first $15,000 of wages, and the annual report fee.
The federal baseline
This page covers what South Dakota adds. The federal rules underneath it apply here too.
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.
Then what does South Dakota tax?
Sales tax. South Dakota taxes services and products transferred electronically as well as goods, so a software company with South Dakota customers usually collects tax on its subscriptions. That, payroll and the Secretary of State’s annual report are the state’s whole claim on a small company.
Accounting next door
- NDNorth Dakota accountingNorth Dakota taxes corporate income at 1.41% to 4.31% on three brackets, with no minimum tax. The default is worldwide combined reporting; water’s edge costs a 3.5% surtax.
- MNMinnesota accountingMinnesota taxes corporations at 9.8% on a single sales factor, charges a minimum fee based on Minnesota property, payroll and sales, adds back 80% of bonus depreciation and caps NOL use at 70%.
- IAIowa accountingIowa taxes corporations at 5.5% on the first $100,000 and 7.1% above for 2026, apportions by a single sales factor, and follows the federal code on a rolling basis.
- NENebraska accountingNebraska taxes corporate income at a flat 4.55% for 2026, falling each year, with single-sales-factor apportionment, market sourcing and combined reporting.
- WYWyoming accountingWyoming has no corporate, gross receipts or individual income tax; the only state-level levy on a corporation is the annual report license tax — $60 or $0.0002 per dollar of Wyoming assets.
- MTMontana accountingMontana taxes corporations at 6.75% (7% water’s edge) with a $50 minimum, apportions by receipts alone from 2025, and still allows a three-year NOL carryback.
Founder guides on this
- US GAAPUS GAAP for early-stage startups, in plain EnglishAccrual accounting, revenue recognition (ASC 606), leases (ASC 842), stock compensation and capitalized software: what each means for a small company.
- RevenueDeferred revenue for SaaS startups, explainedAn annual prepayment is cash today and revenue over a year. How deferred revenue works under ASC 606, why it’s a liability, and the schedule behind it.
- The closeWhy startups should close their books every monthA monthly close turns a bank balance into numbers an investor, an auditor or a 409A firm will accept. What it is, and why it gets expensive to skip.
More of the South Dakota guide
- ReceivablesReceivables and sales tax in South DakotaSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in South DakotaPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in South DakotaWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in South DakotaRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in South DakotaCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 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.