South Dakota sits in the Midwest of the United States. The "Mount Rushmore State" covers just under 200,000 km². It borders North Dakota to the north, Minnesota and Iowa to the east, Nebraska to the south and Wyoming and Montana to the west. South Dakota is home to a little over 800,000 people. The capital, Pierre, is not one of the state's largest cities.
A business-friendly environment
South Dakota gives entrepreneurs and small business owners a range of advantages. CNBC confirmed the cost advantage in 2019, ranking South Dakota the second-cheapest state in the nation to do business. The state took the same spot in the "Business Friendliness" category. According to Forbes, the "Mount Rushmore State" is the "Best State for Business Costs" (2019).
Alongside light regulation, South Dakota scores with very few taxes. There is no corporate income tax and no personal income tax at all. Entrepreneurs get plenty of freedom here and can focus entirely on investing in their business and growing it.
Newcomers to South Dakota find a well-connected business community. Collaboration across companies matters here, and mentorship plus a healthy dose of hospitality break down the barriers to other executives and decision-makers. The business-friendly climate and a reliable economy leave room for innovation. It is no accident that Sioux Falls topped the "Best Small Places for Business & Careers" ranking (Forbes, 2019).
Growth in key industries
Companies in the state's key industries show steady growth. In fact, the "Mount Rushmore State" is home to one of the largest financial sectors in the country. And South Dakota-based companies lead the nation in food science and food production.
South Dakota knows the value of agricultural science and innovation. Thanks in part to its unique research institutions and a rich history of farm production, the state leads in value-added agriculture. Plenty of room to grow, expanding livestock herds and a dedicated Midwestern workforce have made South Dakota a top location where food processors thrive.
South Dakota's life sciences industry offers private and public companies a wealth of support through a large network of partners and programs that promote research, advocacy and training in biotechnology. The life sciences infrastructure includes cGMP-compliant facilities, state-of-the-art research parks and world-class health systems, plus numerous life sciences degree programs at state institutions.
South Dakota scientists have filed hundreds of patents, from agri-bio technologies to renewable energy systems and surgical devices. With easy access to resources, leadership, collaboration and a business-minded environment, life sciences companies in South Dakota are better placed to push boundaries and achieve breakthroughs.
A workforce that's always ready
Passion, commitment and skill are the words people like to use for South Dakota's workforce. Workers are considered the state's most valuable asset and have already helped many companies grow. Thanks to high-quality, diverse education, there is highly qualified talent across all industries and job types.
This well-educated workforce plays its part in South Dakota's progress. The state has one of the highest net migration rates in the country, which helps supply companies with enough talent to keep developing.
Income tax in South Dakota
South Dakota levies no income tax. You still pay federal income tax, though.
Corporate income tax in South Dakota
South Dakota levies no corporate income tax. You still pay federal corporate income tax, though.
Sales tax in South Dakota
The US has no European-style VAT. Instead, states, counties and municipalities levy a local sales tax on sales of goods (but not services).
Sales tax rate in South Dakota
South Dakota's state sales tax is 4.2%. Municipalities add up to 2% on top, so the combined rate can reach 6.2%.
South Dakota nexus laws & sales tax
Learn more about economic nexus laws and sales tax.
Effective date
November 1, 2018
Included transactions:
Gross revenue from sales of tangible personal property, electronically delivered products or services into the state
Treatment of exempt sales:
Exempt sales and exempt services count toward the threshold
Trigger:
Sales only (the former 200-transaction rule has been repealed)
Sales/transaction threshold:
$100,000; the former 200-transaction threshold no longer applies
Evaluation period:
The threshold applies to the previous or current calendar year
Additional information:
- Registration requirements: South Dakota requires remote sellers to register and to collect and remit South Dakota sales tax from the moment they exceed the economic nexus threshold. For more information, see the Remote Seller Bulletin.
- Remote seller information
South Dakota marketplace sellers & sales tax
Learn more about registration requirements for marketplace sellers
Effective date for marketplace facilitators:
March 1, 2019
Economic nexus threshold:
For remote sellers: more than $100,000 in gross sales into South Dakota in the current or previous calendar year; the former 200-transaction threshold no longer applies (special rules apply to marketplace providers). Remote sellers should include sales made through a marketplace when calculating the threshold. Marketplace facilitators include all taxable sales made through the marketplace when calculating the threshold.
Registration requirements:
- Remote multichannel sellers: Once you exceed the economic nexus threshold, you must register with the South Dakota Department of Revenue (DOR) and collect South Dakota sales tax on sales not taxed by a marketplace facilitator.
- Sales made through a marketplace facilitator should be treated as sales for resale.
- Remote marketplace sellers: You must register once you exceed the economic nexus threshold. You can file an affidavit stating that you sell only through one or more marketplace providers; this lets you hold an active sales tax license without having to file returns. Contact the South Dakota DOR for details.
- In-state multichannel sellers: You must register with the South Dakota DOR and collect tax on sales not taxed by a marketplace facilitator.
- Sales made through a marketplace facilitator should be treated as sales for resale.
- In-state marketplace sellers: You must register. Contact the South Dakota DOR for details.
- Learn more here.
For an overview of every state, see our guide to the US states. Whether South Dakota or another state is the right home for your US company is covered in Which US state is best for your company?. How a tax-free US LLC without a US permanent establishment works is explained by our sister site zerotax.llc.
How we help with South Dakota:
If South Dakota is going to be your market, it all starts with the right structure. Under US Company Formation you'll find entity types and states with prices; in a consultation we work out which of them fits you.