SALT Report 2789 – The South Dakota Department of Revenue updated their publication that discusses the proper use of exemption certificates. This publication explains the various reasons for claiming an exemption and the documentation needed to support an exempt sale. For example, a sale may be exempt from sales or use tax if, the product or service is specifically exempt, the purchaser is exempt, or the product or service is used for an exempt purpose.
Additionally, because South Dakota is a member of the Streamlined Sales Tax Agreement, the publication states that they have replaced all of their state exemption certificates with the Streamlined Exemption Certificate.
When accepting an exemption certificate, the following rules will apply:
- A seller may exempt a sale from tax, so long as it receives a properly completed exemption certificate from the purchaser,
- Sellers must keep all exemption certificates received from their customers in their records for at least three years,
- An exemption certificate may be issued for a single purchase or as a blanket certificate, and
- The purchaser is responsible for ensuring that the exemption certificate covers the purchased items
The seller will be relieved of the responsibility of collecting and remitting sales tax when the purchaser provides an exemption certificate that is properly completed. An exemption certificate is considered properly completed if it contains the following information:
- The state the exemption is claimed in
- The purchaser’s name and address
- The purchaser’s Tax ID Numbers or FEIN
- The seller’s name and address
- The purchaser’s Type of Business
- The purchaser’s reason for exemption
- The purchaser’s signature, however no signature is required if completed electronically
The Department’s publication also addresses how to document an exempt sale that is made to a state or local government, an Indian tribe, a foreign diplomat, a charitable organization, a private or religious educational organization, and to employees of any of these organizations.
Finally, the publication addresses sales that may be exempt for various reasons, such as; sales for resale, sales to manufacturers, sales to wholesalers or retailers, drop shipments, direct pay permits, and exempt products and services.
For Further Information