South Dakota sales tax on invoices (2026 guide)

South Dakota's state sales tax rate is 4.2%, and most cities add a municipal sales tax of 1% to 2%. The 4.2% rate is a temporary cut: it took effect on July 1, 2023, and the Department of Revenue says it is scheduled to end on June 30, 2027, when the rate returns to 4.5%.

The bigger difference for freelancers is that South Dakota taxes most services. Unlike most states, where services are untaxed unless listed, South Dakota taxes services unless they're specifically exempt — so web design, consulting and photography are usually taxable.

South Dakota sales tax rates

Municipal tax applies when the customer receives the product or service in a city that imposes it. Cities can only start or change their rate on January 1 or July 1, so check the Department's rate lookup for the delivery address.

Two changes are on the way. The 2023 law (HB1137) that cut the rate includes a sunset, so the state rate goes back to 4.5% on July 1, 2027. And a 2026 law (SB 96) lets counties adopt a sales tax of up to 0.5% for property tax relief — the Department says the earliest a county tax can take effect is January 2027.

Which services are taxable in South Dakota?

South Dakota's sales tax applies to the gross receipts of all retail sales, including the sale of services, unless an exemption applies. The Department's guide lists examples of exempt services:

• health services, educational services and social services,
• agricultural and forestry services,
• services provided by certain membership organizations,
• financial services performed by institutions registered under bank franchise,
• insurance commissions paid to an agent, and stock and commodity broker services,
• trucking and travel agent services, and
• construction services, which pay the 2% contractor's excise tax instead of sales tax.

Almost everything else is taxable. The Department's tax facts give examples:

• Website development and website maintenance (without placement), and technical assistance and support.
• Photography — photos, sitting fees, retouching and digital photo services.
• Professional business services such as public relations and consulting.

One notable exception: an advertising agency's fee isn't taxable when the agency both prepares the ad and places it in the media.

Getting a South Dakota sales tax license

Any business with a physical presence in South Dakota that sells taxable products or services must hold a South Dakota sales tax license, with no minimum sales threshold. You apply online through the Department of Revenue, and you file and pay through EPath. You must file a return every reporting period, even when you had no sales.

Remote sellers: a business with no physical presence must get a license and collect if it has more than $100,000 in gross sales into South Dakota in the previous or current calendar year. It must register by the first day of the month that starts at least 30 days after it crosses the threshold. Sales made through a marketplace that remits the tax for you aren't your responsibility to remit.

South Dakota law lets you add the tax to the price of the product or service — but you're liable for the tax whether or not you collect it.

What a South Dakota sales tax invoice should show

• your business name and address,
• the customer's name and address,
• a unique invoice number and the invoice date,
• a description and price for each product or service,
• sales tax as a separate line, with the combined state and municipal rate, and
• the total due.

Charges needed to complete the sale, including delivery charges, are part of the taxable amount. In Invoice Native, tick Tax on the taxable lines and enter the combined rate for the place the customer receives your work.

Exemption certificates

You don't have to collect tax when the buyer gives you a completed exemption certificate at the time of sale — for resale, an exempt use, or an exempt buyer such as a South Dakota government. South Dakota is a Streamlined Sales Tax member and accepts the Streamlined Sales Tax Certificate of Exemption developed by the member states.

• You're relieved of the tax only if all fields are completed and the certificate is provided at the time of sale.
• A buyer can give you a single-purchase certificate or a blanket certificate for future purchases.
• Certificates don't expire unless the information changes, but the Department recommends updating them every three to four years.
• Keep certificates for three years.

Relief agencies and religious and private schools must be approved by the Department and include their exemption number. See how to invoice a tax-exempt customer.

A worked example

Say you're a web designer and you deliver work to a client in a city with a 2% municipal tax (a hypothetical local rate for this example), so the combined rate is 4.2% + 2% = 6.2%. You invoice:

• $1,500 to build a website, and
• $300 for marketing consulting.

Both services are taxable in South Dakota: $1,800 × 6.2% = $111.60 in tax, and the invoice total is $1,911.60. Our web developer invoice template lets you set the combined rate once and tick Tax on each line.

Once the state rate returns to 4.5% on July 1, 2027, the same sale would be taxed at 4.5% + 2% = 6.5%: $1,800 × 6.5% = $117.00.

Selling to customers in other states

The Department says products delivered to a location outside South Dakota aren't subject to South Dakota sales tax, but may be subject to the other state's tax. Since the Supreme Court's 2018 decision in South Dakota v. Wayfair — a case about South Dakota's own law — states can require out-of-state sellers to register and collect once sales pass a threshold the state sets. If you sell across state lines, check each state's rules and use that state's rate on those invoices.

Common mistakes on South Dakota invoices

• Assuming services are tax-free — in South Dakota, most are taxable.
• Missing the municipal tax for the city where the customer receives the work.
• Keeping 4.2% after June 30, 2027, when the state rate returns to 4.5%.
• Accepting an incomplete exemption certificate, or one handed over after the sale.
• Charging sales tax on construction services, which fall under the contractor's excise tax.

You can check your numbers with our sales tax calculator.

Quick checklist for South Dakota invoices

• ✅ South Dakota sales tax license before your first taxable sale
• ✅ Checked whether your service is exempt (most aren't)
• ✅ 4.2% state plus the municipal rate where the customer receives the work
• ✅ Calendar reminder to switch to 4.5% on July 1, 2027
• ✅ Completed exemption certificates on file for three years