TaxByte: South Dakota Eliminates 200-Transaction Threshold from Economic Nexus Requirement

South Dakota has recently changed its economic nexus threshold for sales tax, which affects remote sellers who sell goods or services into the state. Here is a quick summary of the change and how it may impact your business.

Changes at a glance

• South Dakota has eliminated the 200-transaction threshold from its economic nexus requirement for sales tax, effective July 1, 2023.
• The economic nexus threshold will now be gross revenue of $100,000 in the previous or current calendar year, effective July 1, 2023.
• Smaller remote sellers who do not exceed $100,000 in sales revenue but exceed 200 transactions in South Dakota may no longer have to collect and remit sales tax in the state as of July 1, 2023.
• Remote sellers who exceed $100,000 in sales revenue in South Dakota will still have to collect and remit sales tax in the state as of July 1, 2023.

For more details on the change and what it means for your business, read on.

What is the change in South Dakota?

On February 13, 2023, South Dakota Governor Kristi Noem signed Senate Bill 30 into law, which eliminates the 200-transaction threshold from South Dakota’s economic nexus threshold, effective July 1, 2023. Prior to the bill’s enactment, South Dakota’s economic nexus threshold was gross revenue of $100,000 or 200 or more separate transactions in the previous or current calendar year. 

The economic nexus threshold will now be gross revenue of $100,000 in the previous or current calendar year, effective July 1, 2023.

How does this affect remote sellers in South Dakota?

This change is potentially good news for smaller remote sellers making sales into South Dakota whose sales don’t exceed $100,000 in a calendar year but whose transaction count exceeds 200. These sellers will no longer have to register and collect sales tax in South Dakota as of July 1, 2023. 

However, remote sellers who have gross revenue of $100,000 or more in the previous or current calendar year will still have to comply with South Dakota’s sales tax laws.

What should remote sellers do who have nexus in South Dakota?

Remote sellers who are currently registered and collecting sales tax in South Dakota should review their sales data and determine if they still meet the economic nexus threshold as of July 1, 2023. 

If businesses no longer have nexus in South Dakota, they may be able to cancel their registration and stop collecting sales tax in South Dakota. Remote sellers who are not registered but are making sales into South Dakota should also monitor their sales data and determine if they will meet the economic nexus threshold as of July 1, 2023. 

If businesses do cross South Dakota’s economic nexus thresholds, they should prepare to register and collect sales tax in South Dakota. Remote sellers should consult with a tax professional if they have any questions about how the change affects their specific situation.