Do contractors charge sales tax in South Dakota?

It depends on the work. Building or repairing real property carries a 2% contractor's excise tax instead of sales tax; some trades charge sales tax.

South Dakota levies a 2% excise tax on the gross receipts of prime contractors on realty improvement contracts. That covers repair and remodeling of existing real property as well as new construction. Construction services are exempt from sales tax, except floor laying and locksmiths.

The excise tax applies to the total contract price, labor and materials, with no deduction for materials, labor or payments to subcontractors. Except on qualified utility projects, materials the owner furnished are included. A contractor may list the excise tax and any use tax as a separate line item on contracts and bills. Because tax collected is itself gross receipts, the Department suggests a bid factor of 2.041% to recover the full 2%.

The contractor is the consumer of the materials it installs and pays sales or use tax on them. A subcontractor that keeps the prime contractor's project exemption certificate owes no excise tax; one without it is treated as a prime contractor.

Some contractor work is subject to sales tax instead: lawn, garden and tree services done apart from a realty improvement contract, most floor covering sales and installations, cleaning, calibration and adjustment without repairing or replacing parts, and repair services. The state sales tax rate is 4.2%, with municipal tax of 1% to 2% on top; the statute shows 4.5% effective July 1, 2027.

It turns on: whether the job is a realty improvement or a sales-taxable service; for flooring, the type of floor covering; whether the contractor is the prime contractor or a subcontractor holding a certificate.

“The tax imposed by this chapter applies to the total contract price including all labor and materials.”SDCL 10-46A-3