South Dakota LLC Taxes

South Dakota’s generally low cost of living and plenty of natural areas to explore make it an appealing place to start a business. But, as more business owners choose to start their ventures in the state, many may find it challenging to understand the business taxes involved. 

Regardless of the size of your business, if you operate a limited liability company (LLC) in South Dakota, you’ll need to stay up to date on your finances and pay federal, state, and local taxes. Our guide will help you understand which taxes you must pay for your South Dakota LLC.

Recommended: Schedule a free consultation with an accountant to stay on top of your taxes. 

South Dakota LLC Taxes Owed

LLCs benefit from pass-through taxation, which means the business’s profits pass through to its members’ individual tax returns. As a result, your LLC itself doesn’t pay taxes to the federal government or the state of South Dakota. Instead, LLC owners must pay taxes on their portion of the income generated by the LLC. 

In South Dakota, LLC owners can expect to pay the following taxes:

Federal Taxes

Regardless of where your business is located, if you have an LLC within the United States, you will have to pay federal income taxes and federal self-employment taxes. These taxes are reported on your Form 1040.

Federal Self-Employment Taxes

It doesn’t matter if your LLC is a single-member LLC or a multi-member LLC; all LLC members must pay self-employment taxes on their share of the LLC’s profits. The self-employment tax rate is 15.3%. 

Federal Income Taxes

Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets, as well as the percent owed, will change each year. 

South Dakota State Taxes

Each state has its own laws that dictate how it taxes individuals and businesses. For instance, South Dakota doesn’t impose a state income tax on residents or businesses.

South Dakota Income Taxes

South Dakota is one of the few states with no state income tax. But, you’ll still need to pay income tax on the federal level. Having no state income tax makes South Dakota quite business-friendly, helping to drive a steady increase in new businesses.

South Dakota Sales and Use Tax

The state sales tax rate in South Dakota is 4.5%. Some counties or cities also may impose their own local sales taxes with an average rate of 1.9%.

Register for a Sales Tax License

If your business sells taxable goods or services, you must register for a sales tax license with the South Dakota Department of Revenue. You can do this online via the Tax License Applications page of the South Dakota Department of Revenue website.

Additional State Taxes

The South Dakota Department of Revenue oversees the collection of various state-specific taxes businesses may have to pay, depending on their location, industry, and number of employees. A few examples of these additional taxes include:

  • Contractor’s Excise Tax
  • Energy Mineral Severance Taxes
  • Gaming Excise Tax
  • Motor Fuel Taxes
  • Wine and Distilled Spirits Tax

You can find more information on these and other taxes at the South Dakota Department of Revenue website.

South Dakota Local Taxes

The local laws and ordinances of one South Dakota city or county likely will differ from those in another. Regardless of where you live in South Dakota, we recommend you check with your local jurisdiction to ensure your business obtains the proper local permits and follows any local regulations that may impact its operations.

South Dakota LLC Compliance

You must obey South Dakota’s state and local laws in order to maintain your business in good standing. While LLCs technically don’t file taxes with the state, South Dakota businesses must still file an annual report each year.

South Dakota LLC Annual Report

All LLCs in South Dakota have to file an annual report each year with the South Dakota Secretary of State. You can do this by mail with a $65 filing fee or online with a $50 filing fee.

Your LLC’s annual report will be due by the last day of its anniversary month — the month in which the state approved its formation. You can file this report one month before it’s due, but no sooner.

If you don’t file on time, South Dakota’s Secretary of State will mark your LLC as “delinquent.” In order to return your business to good standing, you’ll need to pay a $50 penalty for each late annual report plus the filing fees for those reports. Failure to do so can lead to the state becoming involved and shutting down your LLC.

For more information, check out our South Dakota LLC Annual Report guide.

LLC taxes are complex. While our guide can provide you with important information, we recommend you schedule a free consultation with an accountant to ensure you handle your business taxes correctly.