Tax policy in South Dakota

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Tax policy in South Dakota
Budget Policy Logo on Ballotpedia.png
Tax rates in 2017
Personal income tax:
None
State sales tax:
4.50%
Corporate income tax:
None
Tax revenues in 2016
Total tax collections:
$1.75 billion
Tax collections per capita:
$2,019
Public Policy Logo-one line.png
Total state expendituresState debtSouth Dakota state budget and finances

South Dakota generates the bulk of its tax revenue by levying a general sales tax and select sales taxes (otherwise known as excise taxes). The state derives its constitutional authority to tax from Article XI of the state constitution.[1][2]

Tax policy can vary from state to state. States levy taxes to help fund the variety of services provided by state governments. Tax collections comprise approximately 40 percent of the states' total revenues. The rest comes from non-tax sources, such as intergovernmental aid (e.g., federal funds), lottery revenues and fees. The primary types of taxes levied by state governments include personal income tax, general sales tax, excise (or special sales) taxes and corporate income tax.[3]

HIGHLIGHTS
  • According to the United States Census Bureau, South Dakota collected $1.75 billion in tax revenue in 2016. The state's tax revenue per capita was $2,019.
  • Tax rates[edit]

    Personal income tax[edit]

    See also: Personal income tax

    South Dakota did not utilize a personal income tax in 2017.[4]

    The table below summarizes personal income tax rates for South Dakota and neighboring states in 2017.[4]

    Personal income tax rates, 2017
    State Tax rates Number of brackets Brackets
    Lowest Highest Lowest Highest
    South Dakota No state income tax
    Minnesota 5.35% 9.85% 4 $25,390 $156,911
    Nebraska 2.46% 6.84% 4 $3,090 $29,830
    North Dakota 1.1% 2.9% 5 $37,950 $413,350
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Policy Center, "Individual State Income Tax Rates 2000-2017," accessed October 26, 2017

    Personal exemptions[edit]

    States that collect a personal income tax allow individuals to claim personal exemptions on income taxes each year. The personal exemption indicates that only a person's income above a certain level is subject to taxation. [5]

    Exemptions work by reducing the amount of an individual's taxable income. Both state and federal taxes allow exemptions. The state exemptions for South Dakota and its neighboring states as reported by the Tax Policy Center are reported in the chart below.[6]

    Personal exemptions, 2017
    State Single Married Dependents
    South Dakota No state income tax
    Minnesota $4,050 $8,100 $4,050
    Nebraska $132 $264 $132
    North Dakota $4,050 $8,100 $4,050
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Policy Center, "Individual State Income Tax Rates 2000-2017," accessed October 26, 2017

    Capital gains tax[edit]

    See also: Capital gains tax

    A capital gains tax is a tax levied on the profit gleaned from the sale of a capital asset. Examples of capital assets include stocks, businesses, land parcels, homes, personal items and more. Capital gains are taxable at both the federal and state levels. While the federal government taxes capital gains at a lower rate than regular personal income, states usually tax capital gains at the same rates as regular income. [7][8][9]

    The table below summarizes uppermost capital gains tax rates for South Dakota and neighboring states in 2015.

    Uppermost capital gains tax rates by state, 2015
    State State uppermost rate Combined uppermost rate
    South Dakota 0% 25%
    Minnesota 9.9% 30.9%
    Nebraska 6.8% 29.1%
    North Dakota 3.2% 26.3%
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Foundation, "The High Burden of State and Federal Capital Gains Tax Rates," accessed October 26, 2017

    Sales tax[edit]

    See also: Sales tax

    Almost all states employ a statewide sales tax, which ranges from 2.9 percent in Colorado to 7.25 percent in California. Additionally, many states allow the levying of local sales taxes, which are then added to the state's tax.

    South Dakota's state sales tax was 4.50% percent in 2017. The average local tax was about 1.89% percent, meaning that the average combined sales tax was about 6.39% percent. The table below displays the state tax rates, average local tax rates, and average combined tax rates for South Dakota and its neighboring states.[10]

    Combined sales tax rates, 2015
    State State sales tax Average local sales tax Combined
    South Dakota 4.50% 1.89% 6.39%
    Minnesota 6.88% 0.42% 7.30%
    Nebraska 5.50% 1.39% 6.89%
    North Dakota 5.00% 1.78% 6.78%
    Note: For full annotations, see the source below.
    Source: The Tax Foundation, "State and local sales tax rates, 2017," accessed October 26, 2017

    The table below summarizes sales tax rates for South Dakota and neighboring states in 2017 as well as the state's policy with respect to types of items commonly exempted from sales tax (i.e., food, prescription drugs and nonprescription drugs).[11]

    Sales tax rates, 2017
    State Sales tax rate Exemption status
    Food Prescription drugs Nonprescription drugs
    South Dakota 4.5% Taxable Exempt Taxable
    Minnesota 6.9% Exempt Exempt Exempt
    Nebraska 5.5% Exempt Exempt Taxable
    North Dakota 5.0% Exempt Exempt Taxable
    Source: Tax Policy Center, "Sales Tax Rates 2000-2017," accessed October 26, 2017

    Excise taxes[edit]

    See also: Excise taxes

    Excise taxes, also known as selective sales or differential commodity taxes, are levied for the sales of specific goods or services. Excise taxes are considered indirect taxes because they are not charged directly to individuals. In most cases, the excise tax is paid by the producer or seller of an item. The cost of the tax is then included in the sale price of the item and passed on to the consumer. The tables below provide excise tax rates for motor fuel, alcohol and cigarettes in South Dakota and neighboring states.[12][13][14][15]

    Fuel excise tax rates, 2017 (in cents per gallon)
    State Gasoline Diesel Gasohol
    Excise tax Other taxes Total tax Excise tax Other taxes Total tax Excise tax Other taxes Total tax
    South Dakota 28¢ 30¢ 28¢ 30¢ 26.6¢ 28.6¢
    Minnesota 28.5¢ 0.1¢ 28.6¢ 28.5¢ 0.1¢ 28.6¢ 28.5¢ 0.1¢ 28.6¢
    Nebraska 27.3¢ 0.9¢ 28.2¢ 27.3¢ 0.3¢ 27.6¢ 27.3¢ 0.9¢ 28.2¢
    North Dakota 23¢ 23¢ 23¢ 23¢ 23¢ 23¢
    Note: For full annotations, see the source below.
    Source: Tax Policy Center, "State Motor Fuels Tax Rates 2000-2011, 2013-2017," accessed October 26, 2017
    Alcohol excise tax rates, 2017 (in dollars per gallon)
    State Liquor Wine Beer
    Tax rate Does general sales tax apply? Tax rate Does general sales tax apply? Tax rate Does general sales tax apply?
    South Dakota $3.9 Yes $0.9 Yes $0.3 Yes
    Minnesota $5.0 -- $0.3 -- $0.1 --
    Nebraska $3.8 Yes $1.0 Yes $0.3 Yes
    North Dakota $2.5 -- $0.5 -- $0.2 --
    Note: For full annotations, see the source below.
    1"In 17 states, the government directly controls the sales of distilled spirits. Revenue in these states is generated from various taxes, fees, price mark-ups, and net liquor profits."
    2"General sales tax applies to on-premise sales only."
    Source: Tax Policy Center, "Alcohol Rates 2000-2010, 2013-2017," accessed October 26, 2017
    State cigarette taxes, 2017 (in cents per pack)
    State Tax rate National ranking
    South Dakota 153¢ 26
    Minnesota 304¢ 7
    Nebraska 64¢ 41
    North Dakota 44¢ 48
    Note: For full annotations, see the source below.
    Source: Tax Policy Center, "State Cigarette Taxes, 2017," accessed October 26, 2017

    Corporate income tax[edit]

    See also: Corporate income tax

    South Dakotadoes not levy a corporate income tax. The table below compares the corporate income tax rates of some of its neighboring states.[16][17]

    Corporate income tax rates, 2016
    State Tax rate Brackets Number of brackets
    Lowest Highest
    South Dakota No corporate income tax
    Minnesota 9.80% Flat Rate 1
    Nebraska 5.58% to 7.81% $100,000 $100,000 2
    North Dakota 1.41% to 4.31% $25,000 $50,000
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Foundation, "State Corporate Income Tax Rates and Brackets for 2015," accessed October 26, 2017

    Property tax[edit]

    See also: Property tax

    Most often, property tax applies to real estate, although some states levy property taxes on other types of personal property, such as automobiles. Generally speaking, an individual's property tax liability is determined by the tax rate and the tax base, which is "determined by both the assessed value of the property and ... the share of the assessed value that is subject to tax." To learn more about property taxes, including tabulation methods, see this page. Property tax rates can vary substantially from locality to locality within a state.[18][19][20] [18][19]

    The table below provides the mean amount of property taxes paid in 2012, as well as property tax as a mean percentage of home value for 2014, in South Dakota and neighboring states.[18]

    Mean property taxes paid per state, 2012 and 2014
    State Mean property taxes paid (2012) Property tax as a percent of home value (2014)
    South Dakota $2,190 1.22%
    Minnesota $2,565 1.09%
    Nebraska $2,959 1.65%
    North Dakota $2,530 0.95%
    Source: Tax Policy Center, "Residential Property Taxes in the United States," November 18, 2013
    Source: Tax Foundation, "Facts & Figures 2016: How Does Your State Compare?", accessed October 27, 2017

    The table below lists per capita state and local property tax collections for South Dakota and neighboring states for fiscal year 2013.[21]

    State and local property tax collections per capita, 2013
    State Collections per capita
    South Dakota $1,231
    Minnesota $1,547
    Nebraska $1,649
    North Dakota $1,140
    Source: Tax Foundation, "Facts and Figures 2016: How Does Your State Compare?" accessed October 26, 2017

    Estate and inheritance taxes[edit]

    See also: Estate and inheritance taxes

    Estate and inheritance taxes are levied on the property of deceased individuals (decedents). Generally speaking, an estate tax is applied to the value of a decedent's property and is paid from the estate before distribution to any heirs. By contrast, an inheritance tax is paid by the heir or heirs of a decedent's assets.[22][23][24]

    South Dakota does not levy an estate tax, although residents are liable for the federal estate tax. The table below summarizes the estate tax rates for South Dakota and neighboring states in 2016.[24]

    Estate taxes, 2016
    State Exemption threshold Minimum rate Maximum rate
    South Dakota N/A
    Minnesota $1,600,000 9.00% 16.00%
    Nebraska N/A
    North Dakota N/A
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Foundation, "Facts and Figures 2015: How Does Your State Compare?" accessed October 5, 2015

    Tax revenues[edit]

    See also: South Dakota state budget and finances

    The table below breaks down state government tax collections by source in 2016 (comparable figures from surrounding states are also provided to give additional context). Figures for all columns except "2016 population" and "Per capita collections" are rendered in thousands of dollars (for example, $2,448 translates to $2,448,000). Figures in the columns labeled "2016 population" and "Per capita collections" have not been abbreviated.[25]

    State tax collections by source ($ in thousands), 2016
    State Property taxes Sales and gross receipts Licenses Income taxes Other taxes Total 2016 population Per capita collections
    South Dakota N/A $1,440,041 $268,227 $32,684 $6,598 $1,747,550 865,454 $2,019
    Minnesota $849,824 $10,120,647 $1,426,235 $12,248,267 $544,155 $25,189,128 5,519,952 $4,563
    Nebraska $123 $2,362,718 $185,082 $2,552,391 $16,819 $5,117,133 1,907,116 $2,683
    North Dakota $3,910 $1,496,824 $204,055 $454,194 $1,550,122 $3,709,105 757,952 $4,894
    United States $18,364,298 $442,909,995 $52,164,396 $392,286,910 $24,538,146 $930,263,745 322,762,018 $2,882.20
    Source: U.S. Census Bureau, "2016 annual survey of state government tax collections by category," accessed June 26, 2017

    The table below lists 2016 tax collections by source as percentages of total collections. About 82.4 percent of South Dakota's total state tax collections came from sales taxes and gross receipts.[25]

    State tax collections by source (as percentages), 2016
    State Property taxes Sales and gross receipts Licenses Income taxes Other taxes
    South Dakota N/A 82.4% 15.3% 1.9% 0.4%
    Minnesota 3.4% 40.2% 5.7% 48.6% 2.2%
    Nebraska 0.0% 46.2% 3.6% 49.9% 0.3%
    North Dakota 0.1% 40.4% 5.5% 12.2% 41.8%
    Source: U.S. Census Bureau, "2016 annual survey of state government tax collections by category," accessed April 4, 2016


    Tax ballot measures[edit]

    Voting on taxes
    Taxes.jpg
    Ballot measures
    By state
    By year
    Not on ballot
    See also: Taxes on the ballot and List of South Dakota ballot measures

    Ballotpedia has tracked the following ballot measures relating to taxes in South Dakota.

    1. South Dakota Tax Reduction, Initiative 3 (1992)
    2. South Dakota Property Tax Assessments, Amendment D (2006)
    3. South Dakota Increase Taxes on Tobacco, Initiative 2 (2006)
    4. South Dakota No Tax on Food, Initiative 1 (2004)
    5. South Dakota State Income Tax, Initiative 2 (1970)
    6. South Dakota Supermajority Required to Raise Taxes, Amendment B (1996)
    7. South Dakota Prohibit Property Taxes from Funding Schools, Amendment A (1998)
    8. South Dakota Leased Lands Taxation, Amendment A (1994)
    9. South Dakota Inheritance Tax, Amendment C (2000)
    10. South Dakota Limit Property Tax, Amendment E (1990)
    11. South Dakota Income Tax, Amendment C (1990)
    12. South Dakota Property Tax Limitation, Amendment C (1988)
    13. South Dakota Mining Tax, Initiative 2 (1988)
    14. South Dakota Agricultural Property Taxes, Amendment F (1998)
    15. South Dakota Property Classification, Amendment A (2000)
    16. South Dakota Property Tax, Amendment B (1980)
    17. South Dakota Property Tax Reform, Initiative 1 (1994)
    18. South Dakota Tax Revenues for Grants Referendum, Referred Law 14 (2012)
    19. South Dakota Sales Tax Increase Measure, Initiated Measure 15 (2012)
    20. South Dakota Repeal of the Telecommunication Tax, Initiative 8 (2006)
    21. South Dakota Revise Taxation Articles Referendum (1908)
    22. South Dakota Change State Tax Structure (1910)
    23. South Dakota Uniform Taxation of Corporations, Constitutional Amendment 1 (1912)
    24. South Dakota Graduated Individual Income Tax (1918)
    25. South Dakota Special Assessment on River Drainage Lands (1922)
    26. South Dakota Property for School Taxation (1930)
    27. South Dakota Tax on Rural Credit Lands (1930)
    28. South Dakota Motor Vehicle Registration (1930)
    29. South Dakota Butter Tax (1932)
    30. South Dakota Taxes for Highways (1940)
    31. South Dakota Tax on Public Shooting Areas (1948)
    32. South Dakota Assessment of Agricultural Lands (1954)
    33. South Dakota Tax Exemption for Highway Property (1958)
    34. South Dakota Income Tax Increase, Amendment D (1978)
    35. South Dakota Initiated Measure 25, Tobacco Tax Increase Initiative (2018)
    36. South Dakota Initiated Measure 28, Prohibit Food and Grocery Taxes Initiative (2024)

    Recent news[edit]

    The link below is to the most recent stories in a Google news search for the terms South Dakota taxes. These results are automatically generated from Google. Ballotpedia does not curate or endorse these articles.

    See also[edit]

    External links[edit]

    Footnotes[edit]

    1. South Dakota Legislature, "Constitution," accessed October 17, 2014
    2. Tax Policy Center, "State Tax Collection Shares by Type 2000-2013," June 20, 2014
    3. Brunori, D. (2011). State Tax Policy: A Political Perspective. Washington, D.C.: The Urban Institute Press
    4. 4.0 4.1 Tax Policy Center, "Individual State Income Tax Rates 2000-2017," accessed October 26, 2017
    5. Tax Policy Center, "What is the personal exemption?" accessed December 14, 2015
    6. Internal Revenue Service, "3. Personal Exemptions and Dependents," accessed December 14, 2015
    7. Internal Revenue Service, "Topic 409 - Capital Gains and Losses," August 19, 2014
    8. Tax Foundation, "The High Burden of State and Federal Capital Gains Tax Rates," February 11, 2014
    9. Tax Policy Center, "Capital Gains and Dividends: How are capital gains taxed?" June 22, 2011
    10. The Tax Foundation, "State and local sales tax rates, 2017," accessed October 26, 2017
    11. Tax Policy Center, "Sales Tax Rates 2000-2017," accessed October 26, 2017
    12. Tax Policy Center, "Excise taxes," accessed October 20, 2014
    13. Investopedia, "Excise Tax," accessed October 20, 2014
    14. Tax Foundation, "Excise Taxes," accessed October 20, 2014
    15. Internal Revenue Service, "Excise Tax," accessed October 20, 2014
    16. Investopedia, "Corporate Tax," accessed September 24, 2014
    17. Tax Foundation, "State Corporate Income Tax Rates and Brackets for 2015," accessed October 7, 2015
    18. 18.0 18.1 18.2 Tax Policy Center, "Residential Property Taxes in the United States," November 18, 2013
    19. 19.0 19.1 Bankrate, "Property taxes explained," February 3, 2000
    20. Investopedia, "Property Tax," accessed September 26, 2014
    21. Tax Foundation, "Facts and Figures 2015: How Does Your State Compare?" accessed October 5, 2015
    22. About.com, "What's the Difference Between an Estate Tax and an Inheritance Tax?" accessed October 16, 2014
    23. Internal Revenue Service, "Estate Tax," updated September 29, 2014
    24. 24.0 24.1 Tax Foundation, "Facts and Figures, 2015," accessed October 6, 2015
    25. 25.0 25.1 U.S. Census Bureau, "2016 annual survey of state government tax collections by category," accessed June 26, 2017

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