South Dakota’s marketplace facilitator sales tax law, explained
by September 22, 2023
Please note: This blog was originally published in 2019. It’s since been updated for accuracy and comprehensiveness.
The state of South Dakota requires marketplaces to collect sales tax on behalf of sellers on online marketplaces like Etsy and eBay.
This means that if you sell on a platform like Etsy, then Etsy will collect sales tax from your South Dakota buyers on your behalf, and remit it to the state.
But as usual, there are always a few wrinkles here when it comes to e-commerce sales tax.
This post will explain what online sellers need to know about the South Dakota marketplace facilitator law, and answer your frequently asked questions.
Overview of the South Dakota marketplace facilitator law
South Dakota’s marketplace facilitator law states that marketplace providers must register for a sales tax license and collect and remit sales tax on all sales into South Dakota if the threshold of at least 200 or more transactions or $100,000 in sales into the state is met.
Quick facts about the South Dakota marketplace facilitator law
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- Effective date: March 1, 2019
- Threshold: South Dakota’s marketplace facilitator law states that marketplace facilitators are required to remit sales tax on all sales into the state if the economic thresholds of 200 or more transactions into South Dakota, or $100,000 or more in sales, are met.
- Marketplaces that have adopted this law:
Frequently asked questions about marketplace facilitator laws
What exactly is a marketplace facilitator in South Dakota?
South Dakota law uses the term marketplace provider and defines this as: a marketplace provider is any person that facilitates a sale for a marketplace seller through a marketplace by:
- Offering for sale by the marketplace seller, by any means, tangible personal property, products transferred electronically, or services for delivery into this state; and
- Directly, or indirectly through any agreement or arrangement with third parties, collecting payment from a purchaser and transmitting the payment to the marketplace seller, regardless of whether the person receives compensation or other consideration in exchange for facilitating the sale or providing any other service
Online sales platforms like Amazon and eBay are considered marketplace facilitators under South Dakota law.
Does this mean I can stop collecting South Dakota sales tax?
It depends. If you have nexus in the state (physical or economic) and you make sales to customers in South Dakota on platforms outside of the marketplace that are now automatically collecting and remitting, you will also need to collect tax on your end on the South Dakota orders that are processed on the other platforms.
Does this mean I can cancel my South Dakota sales tax permit?
No, marketplace-only sellers should not cancel their sales tax permits.
Do I still need to file a South Dakota sales tax return?
If you are registered to collect sales tax in South Dakota (i.e. you have an active South Dakota sales tax permit) then the state still requires that you file sales tax returns. Once you register for a license, you will be required to file a return based on the frequency the state has assigned you.
- If you’ve previously registered, the state expects you to remain registered and continue to file returns (even if you are filing a $0 return).
What do I do with any South Dakota sales tax I have already collected?
If you have already collected South Dakota sales tax from buyers, it is vital that you remit that amount to the state. The only way to get in serious criminal trouble in sales tax is to collect sales tax from buyers on the state’s behalf but keep it in your own pocket.
Does TaxJar handle this for me?
Yes.
TaxJar AutoFile handles South Dakota sales tax automatically
TaxJar AutoFile automatically compiles your sales tax data the way the state of South Dakota wants it filed. For example, many states, South Dakota included, want sellers to break down their sales tax collected interstate (sales originating in South Dakota sent to another state) and intrastate (sales made from South Dakota to South Dakota.)
If a marketplace has collected sales tax on your behalf, TaxJar reports that directly to the state so that the state is aware you have met your sales tax obligations.
If you currently AutoFile your South Dakota sales tax returns, you don’t need to do a thing. It’s handled!
TaxJar reports give you all the info you need to file manually
If you prefer to file manually, your TaxJar Reports also reflect what the South Dakota Department of Revenue wants to see on your tax return.
Also don’t worry that you will double pay. TaxJar accounts for sales tax collected on your behalf, and only shows you the amount you owe to the state out of your pocket.
Further reading on South Dakota sales tax and marketplace facilitator laws:
- TaxJar’s Marketplace Facilitator FAQ
- State by State: Marketplace Facilitator Laws Explained
- South Dakota Sales Tax Guide for Businesses
