Business-Friendly State - South Dakota
South Dakota is a U.S. state in the Midwestern region of the United State. South Dakota is the seventeenth largest by area, and the fifth smallest by population in the country. Behind agriculture, tourism is South Dakota’s second-largest industry.
The tax climate in the state is incredibly business-friendly. South Dakota does not have a corporate income tax, nor does it have gross receipts tax. The state’s limited business taxes and compliance costs give businesses a competitive edge by helping them keep the profit to invest in their company’s growth. In addition, South Dakota does not impose personal income tax, personal property tax, and inheritance or estate tax, which attract the foreign investors to do business in South Dakota.
Although South Dakota business entities do not need to pay state income tax, they are required to pay following taxes:
1. Federal Income Tax Return
According to Internal Revenue Service (IRS), all business entities must file an income tax return on or before the following April 15th (Corporation) or March 15th (LLC) of the tax year, or Oct 15th (Corporation) or Sep 15th (LLC) with extension, if calendar year is applied on tax purpose. However, the business entity must pay the tax due in full no later than the original due date for filing its tax return (not including extensions). Interest and penalty will be charged on taxes paid late even if an extension of time to file is granted.
2. Sales or Use Tax
If the entity located in South Dakota and engage in sale of tangible personal property or other taxable services, you will need to pay the state’s sales tax. The use tax generally applies to the storage, use, or other consumption in South Dakota of goods purchased from retailers in transactions not subject to the sales tax. Use tax may also apply to purchases shipped to a South Dakota consumer from another state, including purchases made by mail order, telephone, or Internet.
The sales and use tax rate in South Dakota consist of the state tax rate (4.50%), the local tax rate, and any district tax rate that may be in effect.
3. Payroll Tax
If the business entities have employees and pay wages in U.S., they must report income and payroll taxes withheld from their employees to Internal Revenue Service (IRS) periodically. The business entities are also responsible for filing and paying Social and Medicare Taxes (employer share amount) and Federal Unemployment Taxes. Employers in South Dakota are required to contribute to Unemployment Insurance Tax (UI). There is no state withholding tax for South Dakota.
4. Annual Renewal
All active business entities registered at South Dakota are required to operate in compliance with the Business Corporation Act/Uniform Limited Liability Company Act of the State of South Dakota. They must have and maintain a registered agent, which has a physical street address in South Dakota; must file annual report with the South Dakota Secretary of the State every year; must renew state/local business license/permit periodically(if applicable). The annual reports is due every year on the 1st day of the anniversary month of when the business was filed. Failure to file the required Annual Report, the entity will become delinquent and will incur additional late fees. If the entity continues to stay in a delinquent status, it may be Administratively Dissolved.
If you are interested in South Dakota business registration or annual renewal services, please contact Kaizen professional consultants. Kaizen U.S. office is a professional CPA firm, offers complete compliance services and business support. Please consult with Kaizen consultants for more details.
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