Motor Vehicle Sales, Lease and Rentals, and Repairs

Motor Vehicle Sales, Lease and Rentals, and Repairs
http://dor.sd.gov/  1.800.829.9188
Motor Vehicle Sales,
Lease and Rentals,
and Repairs
The purpose of this Tax Fact is to explain how South Dakota state and
local sales taxes apply to motor vehicle dealers, repair shops and body
shops. It is not intended to answer all questions that may arise. The
information in this fact sheet is current as of the date of publication. This
guide may change with updated information or added examples.
April 2015
This fact sheet is useful for:
Automotive Dealers
Body Shops
Garages
Independent Installers
Paint Shops
Motor Vehicle Rental Agencies
Repair Shops
Service Stations
Table of Contents
Taxes and Rates ......................................... 2
Sale or purchase of motor vehicles............ 2
Optional services and contracts................. 4
Mounted Equipment.................................. 5
Lease or Rental of vehicles......................... 6
Sourcing ..................................................... 7
Repairs ....................................................... 9
Resale purchases....................................... 10
Use tax ...................................................... 10
Delivery Charges ....................................... 11
Warranties ................................................ 12
Contact Information.................................. 13
Motor Vehicle Sales and Purchases
With few exceptions, the sale of products and services in
South Dakota is subject to sales or use tax. One exception is
that the sale or purchase of a motor vehicle subject to the
motor vehicle excise tax is not subject to sales or use tax.
Dealers are not required to collect or pay the motor vehicle
excise tax on motor vehicles they sell.
If you sell taxable products or services in
South Dakota, you must obtain a sales tax
license from the South Dakota Department
of Revenue.
Apply for a sales tax license online at
http://sd.gov/taxapp.
Dealers are required to collect the state sales tax and any
applicable municipal sales tax, municipal gross receipts tax, and tourism tax on any vehicle, product, or service
they sell that is subject to sales tax in South Dakota.
Purchasers of most new and used motor vehicles, trailers, semitrailers, and motorcycles owe a 4% motor
vehicle excise tax on the purchase price. The purchaser is responsible for contacting their County Treasurer to
pay the motor vehicle excise tax and to title and license the vehicle within 30 days of their purchase.
Motor vehicles are not subject to the motor vehicle excise tax if:

The purchaser requests and is approved for a title only pursuant to SDCL 32-3-4. In limited
situations, a purchaser may obtain a title without payment of the motor vehicle excise tax. This only
applies to vehicles that will not be operated on streets and highways or waterways of South Dakota or any
state and must be hauled or transported to their destination. The purchaser must request the title only tax
exemption within 30 days of the date of purchase and prior to a title being issued. Only certain vehicles
qualify for a title only. Contact your County Treasurer with questions or to apply for a title only.
Vehicles approved for a title only are subject to use tax. The purchaser is responsible for contacting
the Department of Revenue to pay the 4% state use tax, plus applicable municipal use tax. Use tax is not
due if the vehicle is purchased from a person and not from a business. All sales of vehicles by auction are
subject to either sales or use tax or motor vehicle excise tax unless exempt under SDCL 32-5B-2.

The vehicle is exempt from motor vehicle excise under SDCL 32-5B-2. Motor vehicles exempt from
the motor vehicle excise tax under SDCL 32-5B2 are also exempt from sales tax. This includes
South Dakota Taxes and Rates
the following (see SDCL 32-5B-2 for a complete
Motor Vehicle Excise Tax – Applies to the purchase of
list):
•
•
Any motor vehicle sold or transferred that is
eleven or more model years old and which is
sold or transferred for $2,200 or less before
trade-in;
Any motor vehicle transferred as part of the
sale of the assets of the business entity if the
motor vehicle was previously titled, licensed,
and registered in this state;
•
Any motor vehicle repossessed by a secured
party or lien holder;
•
Any damaged motor vehicle transferred to an
insurance company in the settlement of an
insurance claim;
•
Any motor vehicle rented for twenty-eight
days or less that is subject to the tax imposed
by § 32-5B-20 (See Motor Vehicle Leasing
section for additional information).
most motor vehicles (See Table 1)
(Rate increased from 3% to 4% effective April 1, 2015)
State Sales and Use Tax – applies to all sales or
purchases of taxable products and services.
4%
4%
The following taxes may apply in addition to the state sales tax:
Municipal Sales and Use Tax – applies to all sales of
products and services that are subject to the state
sales or use tax if the purchaser receives or uses the
product or service in a municipality that imposes a
sales or use tax.
1 to
2%
Tourism Tax –applies to the rental of certain motor
vehicles. (See Table 3) Tourism tax does not apply
when you are remitting use tax.
1.5%
Motor Vehicle Gross Receipts Tax – applies to the
rental of cars, trucks, and vans for less than 28 days,
and the rental of certain trailers for 6 months or less.
(See Table 3)
4.5%
2 | April 2015 │ South Dakota Department of Revenue │ Motor Vehicle Sales, Lease and Rentals, and Repairs Tax Facts
Motor Vehicle Sales or Purchase
Table 1 shows the tax that applies to the purchase or sale of some motor vehicles. Also shown is Titling,
License and Registration requirements for those vehicles. This is not an all-inclusive list of motor vehicles. For
title, license and registration information on a specific vehicle, please contact your County Treasurer.
For tax information on vehicles that will be leased or rented, see Table 3.
Table 1: Motor Vehicle Sales or Purchases
Tax, Titling, Licensing and Registration
Sales
or Use
Tax
Motor
Vehicle
Excise
Tax
Titling
License
and
Registration
Cars, Trucks,
Vans (including
new, used, or
rebuilt)
Low Speed
Vehicle
No
Yes
Required
Required
No
Yes
Required
Required
Motorcycles
No
Yes
Required
Required
Moped
(50cc or smaller)
Yes
No
Optional
Optional
Snowmobiles
Boats
No
Yes
Required
Required
Four-Wheel AllTerrain Vehicles
Yes
No
Required
Optional
Off Road Vehicles
Yes
No
Required
Optional
Vehicle
Vehicle Description
Exception: Automobiles, pickups, and vans purchased to
lease to others for 28 days or less are not subject to
Motor Vehicle Excise tax. See Table 3 for tax that applies
to rentals.
A 4-wheeled motor vehicle whose speed attainable in
one mile is more than 20 miles per hour and not more
than 25 miles per hour on a paved level surface. The
MSO or title must clearly identify the vehicle as a lowspeed vehicle. A Low Speed Vehicle may not be
operated on any highway where the speed limit is more
than 35 miles per hour.
Includes motorcycles, motorbikes, mopeds (51cc or
larger), bicycles with a motor attached and all motor
operated vehicles of the bicycle or tricycle type or a
platform on which the driver stands, excludes tractors.
A moped is a motor driven cycle equipped with two or
three wheels. If a combustion engine is used, the
maximum piston or rotor displacement shall be 50cc,
regardless of the number of chambers in such power
source. The power source shall be equipped with a
power drive system that functions directly or
automatically only, not requiring clutching or shifting by
the operator after the drive system is engaged.
See Tax Facts on Boats
Any all-terrain vehicle with four or more wheels with a
combustion engine having a piston or rotor
displacement of two hundred cubic centimeters or
more. The licensed four-wheel, all-terrain vehicle may
not be operated on the interstate highway.
Any self-propelled, two or more wheel vehicle designed
primarily to be operated on land other than a highway
and includes, and any vehicle whose manufacturer’s
statement of origin (MSO) or manufacturer’s certificate
of origin (MCO) states that the vehicle is not for highway
use.
3 | April 2015 │ South Dakota Department of Revenue │ Motor Vehicle Sales, Lease and Rentals, and Repairs Tax Facts
Dealer Fees and Purchase Options with Sale of a Vehicle
Table 2 shows the tax that applies to fees a dealer may charge on a vehicle sale and optional services and
products a customer may purchase.
Table 2: Fees and Options with Purchase of a Vehicle
Applicable Taxes
4% Motor
Vehicle
Excise Tax
Description
Certification Charge
Delivery Fee
Documentation Fee - Included in Sale Price
Documentation Fee - Not Included in Sale Price
Interest Charges
New Car Preparation Charges
The dealer may purchase these services for resale.
Includes cleaning, removing protective shipping coverings, checking all fluids, running tests, checks on
wipers, lights, horns, etc.
Optional Contracts
Credit Life & Disability Insurance - subject to insurance premium tax
Debt Protection Plan - sold at time of vehicle purchase
Extended Service Contract/Extended Warranty – sold at time of vehicle purchase
Extended Service Contract/Extended Warranty – sold after vehicle purchase
GAP Waiver - agreement from finance company to waive the loan value that is greater than the value of
the vehicle if the vehicle is wrecked before the loan is paid off
GAP Insurance - subject to insurance premium tax
Lease Wear Care or Protection Plans - on lease vehicles pays for damages such as scratches and dents
Maintenance Care Contracts (may include oil and filter changes, antifreeze, tire rotations, chassis
lubrications, inspections of safety and mechanical components, etc.)
Mechanical Breakdown Insurance - subject to insurance premium tax
Other Optional Contracts - roadside assistance plans, tire and wheel repair plans, windshield repair
plans, bent & dent dealer options, key replacement plans, trip interruption protection plans
Sales or
Use Tax
(State and
Municipal)
X
X
X
Exempt
X
Exempt
X
X
X
Exempt
Exempt
X
X
Exempt
X
Exempt
X
Exempt
Exempt
X
Optional Products, Customizing, and Accessories
Optional Products and Customizing that become part of the motor vehicle
A dealer may purchase optional products and the service to install these products for resale.
Examples of optional products and customizing are:
Bed Liners
Bug Shields
Crystal Fusion
Customized Paint
Decals
Electric MV Connector
Floor Mats
Lo Jack
Mirror
Polyshield
Running Boards
Seat Covers
Starter Interrupter Devices
Theft Etch
Windshield Enhancements
Products or customizing included in the vehicle sale. Product and customizing may be added prior to
or after the actual sale.
• Products or customizing sold after the vehicle sale.
• Products or customizing sold and added to a vehicle that is exempt from motor vehicle excise tax
Optional Products and Accessories that do not become part of the motor vehicle
A dealer may purchase optional products for resale.
Examples of optional products or accessories are:
Helmets
T-shirts
Cups
Caps
•
4 | April 2015 │ South Dakota Department of Revenue │ Motor Vehicle Sales, Lease and Rentals, and Repairs Tax Facts
X
X
X
X
Contact your County Treasurer to Title, Register and license your vehicle
within 30 days of purchase.
You must show proof you paid sales or use tax before you title a vehicle
that is subject to sales or use tax.
If the dealer did not collect sales tax, you may pay use tax directly to the
Department of Revenue.
The following items are subject to sales or use tax. You may pull these items on a road; however, they are not
subject to motor vehicle excise tax and may not be titled. This is not an all-inclusive list.
Axles
Barbecue Pits
Car Dollies
Log Splitters, Tree Chippers,
Stump Grinders
Small Pull-Type Cement Mixers
Street Sweepers
Jeep Boosters
Tar Pits
Trailers for Air Compressors
Welders
Mounted Equipment
A dealer may add mounted equipment to a vehicle prior
to a sale or include the equipment with the sale but add
the equipment later. Sometimes a customer may buy
the mounted equipment from a separate dealer. The
tax that applies depends on when the customer buys
the equipment.
•
•
Mounted equipment sold with the vehicle or
included in the sale price of the vehicle is subject
to the motor vehicle excise tax and is not subject
to sales tax. The dealer may install the
equipment may before or after the sale. This
applies to new or used motor vehicles and new
or used mounted equipment.
Mounted equipment sold separately from the
vehicle and added after the sale of the motor
vehicle, is subject to sales or use tax. Sales or
use tax also applies to installation charges.
Examples
1. Smith buys a truck chassis for $12,000.
Smith then buys a cement mixer and has it
mounted on the truck.

The $12,000 is subject to motor vehicle
excise tax.

The mixer and installation charges are
subject to sales tax.
2. James buys a truck chassis for $12,000 and
a cement mixer for $8,000 from a dealer.
Both are listed on the motor vehicle
purchase agreement. The Dealer installs the
cement mixer on the truck. James pays
$20,000.

Examples of mounted equipment: truck boxes, hoists,
digger equipment, and cherry pickers.
The truck and cement mixer are subject to
the motor vehicle excise tax.
5 | April 2015 │ South Dakota Department of Revenue │ Motor Vehicle Sales, Lease and Rentals, and Repairs Tax Facts
Motor Vehicle Lease and Rentals
If you rent or lease a motor vehicle for 28 days or less, the rental fee is subject to state and municipal sales tax
and may be subject to tourism tax and motor vehicle gross receipts tax. When you purchase a vehicle to rent
to others you may owe motor vehicle excise tax on the vehicle purchase.
Table 3 shows the tax that applies to the lease or rental receipts of the vehicle described. The last column
indicates if motor vehicle excise tax or sales tax applies to the purchase or sale of the leased or rented vehicle.
Table 3: Motor Vehicle Lease and Rentals
Applicable Taxes
Vehicle
(See Table 1 for vehicle description)
Taxes that apply to the Lease or Rental Payments
Sales or
Municipal
Tourism Motor Vehicle
Use Tax Sales or Use
Tax
Gross Receipts
Tax
Tax
Does Motor Vehicle
Excise Tax or Sales
Tax apply to the
vehicle purchase?
1. Automobiles, Pickups and Vans
 Leased or rented under a single contract for 28
days or less
Yes
Yes
Yes
Yes
No
 Leased or rented under a single contract for
No
No
No
No
Motor Vehicle Excise
Tax
See Table 1
Yes
Yes
No
Yes
No
No
No
No
Yes
No
No
No
No
No
Motor Vehicle Excise
Tax
more than 28 days
If this same vehicle is later rented for 28 days or less,
the receipts from that rental are subject to the state
and applicable municipal sales tax, motor vehicle gross
receipts tax, and tourism tax.
2. Trailers with a trailer ID plate under 32-5-8.1
that have an unladen weight of 9,000 pounds or
more
 Leased or rented under a single contract for 28
days or less
 Rented under a single contract for more than 28
days but less than 6 months
 Rented for more than 6 months
3. Recreational Equipment that are motor vehicles
under 32-5-1.
 Leased or rented under a single contract for 28
days or less
 Leased or rented under a single contract for
Yes
Yes
Yes
No
No
No
No
No
All recreational
vehicles listed are
subject to motor
vehicle excise tax,
except for ATVs and
Mopeds. See Table 1
more than 28 days
Includes:
ATVs*
Campers
Camping trailers
Mopeds*
Motor coaches
*ATVs and Mopeds
are subject to sales
tax and may be
purchased for resale
to lease or rent to
others for resale.
Motorcycles
Snowmobiles
Snowmobile Trailers
Watercraft Trailers
Watercraft (Boats)
4. All motor vehicles other than those listed in 1-3
above that are defined by SDCL 32-5-1
 Leased or rented under a single contract for 28
days or less
 Leased or rented under a single contract for
more than 28 days
Yes
Yes
No
No
See Table 1
No
No
No
No
See Table 1
6 | April 2015 │ South Dakota Department of Revenue │ Motor Vehicle Sales, Lease and Rentals, and Repairs Tax Facts
Motor Vehicle Lease and Rentals (continued)
Optional Products or Services
The following items may be included with a vehicle
rental. The charges for these items are subject to
the same tax as the vehicle rental whether the
rental agency lists each charge on the customer’s
invoice or includes it in the car rental fee.
















Additional driver fee
Airport concession fees and facility fees
Car navigational (GPS) system
Car Satellite radio
Child seat
Drivers 24 years or younger
Drop charges
Emergency roadside service
Energy surcharges
Exceeding mileage
Frequent flyer surcharge
Fuel and service charges
Fuel purchase option
Loss damage waiver
Rental tax surcharges
Ski racks


Up charges for nonstandard vehicles
Vehicle licensing fees passed onto customer
Insurance Premiums
A car rental company does not owe sales tax on
the insurance premiums customers pay for
insurance the rental company sells when the
following criteria are met:
a. The insurance is from a licensed insurance
company;
b. The entire amount charged to the customer
for the premium is subject to insurance
premiums tax; and
c. The charge is itemized on the customer’s
invoice.
If the charge to the customer for the insurance is
greater than the amount the insurance company
pays insurance premiums tax on, the entire charge
is subject to sales tax.
Sourcing – Which State or City Tax Applies?
►
Products or Services Sold
Sales tax applies where the customer receives the product
or service. Receive means where the customer takes
possession of the product.
Products purchased, repaired, or serviced that are picked
up at the seller’s shop are taxed at the shop’s location.
Examples
1. Smith buys an ATV in Sioux Falls and
hires Speedy Transport to deliver the
ATV to Mitchell. Smith provides the
dealer with the delivery information.

Products the seller delivers, with their vehicle or by a
delivery company, are taxed at the delivery address.
When a customer hires a shipping company, the seller will
owe sales tax based on the delivery address. The shipping
company should give the seller documentation showing the
delivery address. If the seller does not have a delivery
address, the seller will owe sales tax based on the
customer’s address.
Products or services delivered to locations outside South
Dakota are not subject to South Dakota sales tax. The
seller must keep documentation of the address used to
determine tax.
The dealer should collect and remit 4%
state sales tax and 2% Mitchell
municipal sales tax because Smith
delivered the ATV to Mitchell.
2. A repair shop picks up a car in rural
Minnehaha County, repairs the car at its
shop in Sioux Falls, then delivers the
repaired car to the customer in rural
Minnehaha County.

The repair service, including any pickup
and delivery charges, is subject to the
4% state sales tax. No municipal tax
applies because the product was
delivered to the customer outside city
limits.
7 | April 2015 │ South Dakota Department of Revenue │ Motor Vehicle Sales, Lease and Rentals, and Repairs Tax Facts
Sourcing – Which State or City Tax Applies? (continued)
►
Lease or Rentals
With the exception of motor vehicles and transportation equipment, sales tax applies to the first lease payment
where the lessee receives or takes possession of the product. If the product is moved to a new location and
the lessee tells the lessor the new location, sales tax applies to each additional payment based on the new
location. If the lessor does not know the product’s new location, sales tax will continue to apply based on
where the lessee received the product.
The intermittent use at different locations, such as use of business property that accompanies employees on
business trips or service calls, does not alter the property location.
Motor Vehicle Lease or Rentals:
Includes the lease or rental of motor vehicles, trailers, or
semitrailers that do not qualify as transportation equipment.
•
One payment covers the entire lease or rental: The
payment is taxed where the customer receives or
takes possession of the property.
•
The lease or rental includes more than one
payment: Each payment, including the first
payment, is taxed at the primary property location,
which is the address for the property the lessee
provides the lessor. Occasional use at a different
location does not change the primary property
location.
Example
Rusty Car Rental in Rapid City rents a car to
John for 7 days. John uses the car to tour the
Black Hills and Badlands in South Dakota.
•
•
Any locomotive and railcar used for the carriage of
persons or property in interstate commerce;
Any truck/truck-tractor with a Gross Vehicle Weight
Rating of 10,001 pounds or greater and any trailer,
semitrailer, or passenger bus that is:
 Registered through the International Registration
Plan; and
 Operated under authority of a carrier authorized
and certificated by the U.S. Department of
Transportation or other federal authority to engage
in the carriage of persons or property in interstate
commerce;
Any container designed for use on and component
parts attached or secured on any transportation
equipment defined in this section.
$ 375.00
50.00
25.00
20.00
Sub Total
$ 470.00
Tax
State sales tax
Rapid City sales tax
Tourism Tax
Motor Vehicle Gross
Receipts Tax
TOTAL DUE
Transportation Equipment:
Transportation equipment includes:
•
7 Day Rental
Full Size Car
GPS Navigation
Collision Damage Waiver
Airport Facility Fee



Rate
4%
2%
1.5%
4.5%
18.80
9.40
7.05
21.15
$ 526.40
All charges on the rental are subject to the
same tax.
The Collision Damage Waiver is not
insurance.
Rapid City tax applies because the car
was delivered to John at the Rapid City
airport.
Sales tax applies to all lease and rental payments for transportation equipment where the customer receives or
takes possession of the equipment.
8 | April 2015 │ South Dakota Department of Revenue │ Motor Vehicle Sales, Lease and Rentals, and Repairs Tax Facts
Repairs and Maintenance
Services such as auto repair, maintenance, body repair, oil changes, and customizing are subject to state and
municipal sales tax. Sales tax applies to the full charge, including parts, labor, and delivery charges.
Rental Vehicles
•
Repairs and maintenance to rental vehicles are subject to sales or use tax whether the rental agency or
the customer pays for the service.
Examples
Dealer Owned Vehicles in Inventory for Sale (includes new and used
vehicles)
•
Maintenance – Maintenance products and services sold to a dealer
for dealer owned vehicles that are in inventory for sale are subject to
sales or use tax. The dealer will owe use tax on maintenance items
taken from their tax unpaid inventory for use in a vehicle. The dealer
cannot buy maintenance products or services for resale.
1. A dealer has a body shop
replace a headlight on a car
that is in inventory for sale.
The dealer gives an
exemption certificate to the
body shop.

Maintenance items include oil, windshield washer fluid, antifreeze,
filters, and auto detailing or cleaning services.
•
Repairs – Dealers may buy replacement and repair parts and repair
services for dealer owned vehicles that are in inventory for sale
without paying sales or use tax. The dealer must give the supplier or
service provider an exemption certificate indicating the purchase is for
resale. Dealers do not owe sales or use tax on repair parts they take
from tax unpaid inventory to repair vehicles they have for sale.
Replacement and repair parts are items that remain with the vehicle
for an indefinite period and include items such as tires, headlights,
body parts (fenders, hoods, etc.), hoses, belts, spark plugs, and
batteries.
•
New or Used Car Detailing – Cleaning a new or used vehicle is
subject to sales tax. The dealer cannot buy the detailing service for
resale.
•
New Car Preparation – A dealer may buy new car preparation
services for resale.
The body shop does not
charge sales tax on parts or
labor when it bills the
dealer.
2. A dealer’s employee
changes a headlight,
changes the oil and filter,
and repairs a chipped
windshield on a car that is
in inventory for sale.

The dealer owes use tax on
the oil and filter because
these are maintenance
items.

No use tax is due on the
headlight or material used
to fix the windshield chip
because these are repairs.

The dealer does not owe
sales or use tax on their
employee’s labor.
New car preparation services include cleaning, removing protective
shipping coverings, checking all fluids, running tests, checking
wipers, lights, horns, etc.
Dealer Owned Vehicles used by the Dealer, Employees, or as a Loaner Car
•
Repairs and maintenance to dealer owned vehicles that the dealer or others are using are subject to
sales or use tax. Any products removed from tax unpaid inventory to repair or maintain these vehicles are
subject to use tax.
9 | April 2015 │ South Dakota Department of Revenue │ Motor Vehicle Sales, Lease and Rentals, and Repairs Tax Facts
Resale Purchases
Dealers, repair shops, or body shops may buy certain products or services
for resale. The dealer must give the seller an exemption certificate.
Products and services a dealer may buy for resale include:
Products for resale to customers
Repairs, detailing, and customizing of a customer’s vehicle
Repairs to vehicles it has in inventory for sale
Customizing of vehicles that are in inventory for sale
New vehicle preparation services
•
•
•
•
•
A dealer, repair shop, or body shop may buy items that become part of a
motor vehicle for resale.
Examples of products a
dealer or repair shop can
purchase for resale:
•
•
•
•
•
•
•
Automotive parts
Cement
Grease
Lacquer
Lubricants
Paints
Tire Patches
Equipment and supplies sold to a dealer, repair shop, or body shop that
the shop will use or consume are subject to sales tax or use tax at the time
of purchase.
Examples of taxable
products:
Use Tax
•
•
If you buy taxable products or services that are used, stored, or consumed
in South Dakota without paying sales tax, you owe use tax. If you buy
taxable items in another state and pay another state’s sales tax at a lower
rate, you owe use tax based on the difference in tax rates when you use or
store the product in South Dakota.
You owe use tax on any item taken out of tax unpaid inventory to use for
your business or your personal use.
•
•
•
•
•
You will owe municipal use tax if you buy a product or service in one city
(or a rural location) and use, store, or consume that product or service in
another city that imposes a higher city tax. For example, JC Repair, mails
a repair part to your address outside Huron. The JC charges 4% state
sales tax. You then use the repaired equipment in Huron. You owe the
additional 2% Huron city use tax on the amount paid for the repair part at
the time you take the repair into Huron.
Example
XYZ Repair charges an
additional 5% for shop
supplies on all repair invoices
issued to customers to cover
the cost of rags, cleaners,
masking tape, etc. they use in
the course of their repair work.

XYZ must pay sales tax on
these supplies at the time
of purchase and must
report sales tax on the 5%
charge to the customer.
You do not owe use tax on items
bought to resell to customers.
The fact that you may add a charge
to a repair bill to cover costs of the
supplies consumed does not relieve
you from your liability for the tax on
such property used or consumed in
the operation of your business.
•
•
•
•
•
•
•
•
•
•
•
•
•
Auto shop equipment
Breathing masks
Brushes
Carburetor and brake
cleaner
Clothing: boots, coats,
coveralls, shirts, work
uniforms
Fire extinguishers
Floor dry
Floor mats and rugs
Grinding compounds
Hand tools
Hearing protectors
Paint remover
Sandpaper
Safety glasses or goggles
(nonprescription)
Soap
Tape
Wash rack supplies
Welding shop equipment
Welding gloves or helmets
Wiping rags
Promotional items: You owe sales or use tax on products such as
calendars, key chains, pens, caps, t-shirts and jackets that you give to
customers or employees.
Donations: If you donate or give away taxable items, you owe sales or
use tax on your cost of the items, unless given to a tax-exempt entity.
For example, if you change the oil in a church van at no charge, you owe
use tax on your cost of the filter and the oil used.
Use tax is due when you receive the product or service. You owe use tax on items you bought with the intent to
resell when you remove them from inventory to use.
10 | April 2015 │ South Dakota Department of Revenue │ Motor Vehicle Sales, Lease and Rentals, and Repairs Tax Facts
All supplies and services
purchased that are not
being resold to a
customer are subject to
sales or use tax.
It is your responsibility to identify taxable purchases when an exemption
certificate is used. You must either tell your vendors to charge you tax on
the taxable items or report the use tax on line 2 of your sales tax return at
the time you make the purchase.
Failure to account for the use tax due from taxable purchases made from
licensed vendors you gave an exemption certificate to may result in a
penalty of 50% of the use tax due in accordance with SDCL 10-45-61.
Delivery and Handling Fees
The retailer’s charge for delivery is subject to the
same state and municipal sales tax rate as the
product or service sold. If the product or service
sold is not taxable, the delivery charge is not
taxable.
Delivery charges include any charge for
transportation, shipping, postage, handling, crating,
and packing.
If you hire a transportation company and bill the
customer for the transportation service, your
receipts for the transportation charge are subject to
the same tax as the product sold.
When a shipment contains taxable and nontaxable
products, sales tax is due on the portion of the
delivery charge for the taxable products. This is
determined by using a percentage of the sales
price compared to the total sales or a percentage of
the weight of the taxable products compared to the
total weight of all products in the shipment.
Waste or Tire Disposal Fees
Examples
1. A parts store ships a part to a customer in rural
Minnehaha County for $200 plus $20 delivery.

The parts store owes 4% state sales tax on $220.
No municipal sales tax is due because the
customer takes possession outside the city limits.
2. A parts store sells spark plugs to a repair shop in
Watertown for $100 plus $10 delivery. The repair
shop provides the parts store with an exemption
certificate.

The parts store does not owe sales tax, as this is a
sale for resale.
3. Jones Auto sells and delivers the following items to
Fred’s Farm Store in Pierre: 2 tires for resale for
$1000 and 1 tire display rack for use by Fred for
$1000. Jones bills Fred $2000 plus $200 delivery.
Fred gave Jones an exemption certificate for the
two tires.
Jones charges state sales tax plus Pierre municipal
sales tax on $1,100 ($1000 for the display rack
plus $100 shipping). Taxable shipping was
determined by dividing the taxable products by the
total sale ($1000 / 2000 = 50%). 50% of the
Towing Services
shipping is taxable ($200 x 50% = $100).
Receipts from towing services are subject to state and city tax at the location to which the vehicle is towed.
Receipts for towing to a location outside South Dakota are not subject to South Dakota sales tax.
The retailer’s charge to the customer for disposing
of waste, including tire disposal fees, is subject to
sales tax.

Driving Services
Fees charged for driving a motor vehicle from one location to another are subject to sales tax or use tax. Sales
tax applies based on the location to which the vehicle is driven. For example, if a person drives a car from
Highmore to Pierre, the state and Pierre municipal sales or use tax is due.
Commissions for Loans
Commission or fees you receive for arranging a loan between the buyer of your product and a lending
institution are not subject to sales tax. This includes fees received for arranging loans for a customer’s
purchase of a motor vehicle.
11 | April 2015 │ South Dakota Department of Revenue │ Motor Vehicle Sales, Lease and Rentals, and Repairs Tax Facts
Warranties, Insurance, and Service Contracts
► Manufacturer’s Warranty
Parts and labor furnished to fulfill a warranty obligation of the manufacturer are not subject to sales tax. Your
receipts from the manufacturer for warranty work are not taxable. You do not owe use tax on parts taken from
inventory to complete work under a manufacturer’s warranty.
Receipts from the customer or manufacturer for items not covered by the warranty are subject to sales tax.
If the manufacturer’s warranty states:
1. No cost to customer for parts
2. Customer is responsible for a percentage of parts and labor
3. Customer pays a deductible for parts or labor
4. Customer is responsible for the repair labor
5. The manufacturer furnishes you the repair part at no charge
6. The manufacturer pays you for the repair part
7. The manufacturer pays you for the repair labor
Sales or Use Tax Due
No sales or use tax due on the parts
Sales tax due on the amount charged the customer
Sales tax due on the amount charged the customer
Sales tax due on the amount charged the customer
No sales or use tax due on the repair part
No sales or use tax due on the repair part
No sales or use tax due on the repair labor
Loaner/rental vehicle: A warranty may provide for a loaner or rental vehicle while a car is being repaired.
•
When the manufacturer pays for the loaner/rental vehicle as provided under a warranty, the receipts are
subject to the motor vehicles gross receipts tax, but are not subject to sales tax or tourism tax.
•
If the customer pays for the rental vehicle, the receipts are subject to state and municipal sales tax, motor
vehicles gross receipts tax, and tourism tax.
► Extended Service Contracts (Extended Warranty)
Extended service contracts that cover unexpected repair costs are subject to the motor vehicle excise tax
when sold at the time of the vehicle purchase.
Extended service contracts sold later are subject to sales tax. Sales tax applies where the extended warranty
is delivered to the buyer.
► Mechanical Breakdown Insurance
Insurance policies are not considered warranty or service contracts. Insurance premiums are not subject to
sales tax; however, the premiums are subject to insurance premiums tax. All charges made to the insurance
company for parts and labor are subject to sales tax.
If you do not know if a service contract is insurance or not, you may contact the South Dakota Department of
Labor, Insurance Division and ask if the company that sells the contract is a licensed insurance company, or
call the Department of Revenue at 1-800-829-9188.
► Implied Warranty
If you do not charge for repairs made to a customer’s motor vehicle after the sale and those repairs are not
covered by a written warranty, you owe use tax on the cost of all parts installed in the customer’s vehicle. You
do not owe use tax on your employee’s labor.
Contact Us
If you have any tax questions, please contact the South Dakota Department of Revenue.
Call toll-free: 1.800.829.9188
Website: http://dor.sd.gov/
Business Tax Division Email: [email protected]
Motor Vehicle Division Email: [email protected]
Mailing address and office location:
South Dakota Department of Revenue
445 East Capitol Ave
Pierre, SD 57501
12 | April 2015 │ South Dakota Department of Revenue │ Motor Vehicle Sales, Lease and Rentals, and Repairs Tax Facts
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