Forming your business entity in Delaware—specifically, a corporation—gives you a lot of flexibility, but you may still need to follow local laws depending on what state you operate in.
Specifically, if you do business in South Dakota, you need to register with the state. We’ll walk through the process and simplify it. But first, how can you tell whether you’re legally doing business in South Dakota?
When to register as doing business in South Dakota
Delaware C corps—and all other corporations formed outside of South Dakota—are referred to as “foreign” corporations by the State.
South Dakota statutes do not specifically define what is considered doing business in the state. However, South Dakota statutes provide that the following activities would not require you to register with the State:
Defending or settling a lawsuit
Having a bank account in the state
Selling through independent contractors
When to register to collect sales tax in South Dakota
Every state has rules about when a company is required to pay sales tax. These are called sales tax nexus rules.
You can think of the nexus as a special version of that state’s border; if you perform certain business activities within that border, you fall into the state’s sales tax nexus, and you’re required to register for and collect state sales tax.
Typically, these actions take the form of buying and selling goods and services.
In South Dakota, the sales tax nexus rules only apply to sellers who sell physical goods or services to South Dakota residents.
Until 2018, selling or buying non-physical goods—like subscriptions to streaming services, SaaS memberships, etc.—did not, generally speaking, qualify you for sales tax nexus. After an important court ruling in 2018, that changed. Now, if you buy or sell non-physical goods or services in a state, you may fall within its sales tax nexus.
South Dakota sales tax nexus (physical goods and property)
If you have a physical presence in South Dakota, then you need to pay sales tax to the state. The state does not define what is necessarily physical presence, however, selling, leasing, or delivering tangible personal property or taxable services is considered physical presence in a state.
You will need to pay sales tax as long as you have physical presence regardless of any minimum thresholds. You can learn more about physical presence for sales tax purposes through the State’s website.
South Dakota sales tax nexus (non-physical goods and property)
The new state sales tax laws applying to non-physical (ie. internet) sales allow you to qualify for sales tax nexus even without physical presence or goods. In South Dakota, you need to cross a certain threshold to qualify.
You will need to collect and remit sales if you have:
- A gross revenue from sales into South Dakota exceeding $100,000; or
- Made sales for delivery into South Dakota in 200 or more separate transactions.
If you would like to take a deep dive, you can check out the State’s website.
As usual, this isn’t legal advice—just a guide. If you’re not 100% clear on whether you fall within South Dakota’s sales tax nexus, it’s best to confer with your legal counsel and/or an accountant that has expertise in South Dakota’s legal code and tax regulations.
How to register to do business in South Dakota
- Select a name under which to do business. This doesn’t have to be the name you registered when incorporating in Delaware, but it can be.
- Fill out an application. You’ll need to file an Application for Certificate of Authority to the South Dakota Secretary of State along with a Delaware Certificate of Good Standing.
- Pay the fee. Now you pay the South Dakota Secretary of State a $765 filing fee.
- Submit your Application for Certificate of Authority.
- Wait. Processing typically takes two to four weeks.
Once you’re approved to operate as a qualified foreign business in Tennessee, you’ll need to comply with certain requirements.
Compliance as a qualified business in South Dakota
To stay in compliance and continue legally doing business in South Dakota, you need to meet two requirements: maintaining a registered agent and filing your annual report. Unlike most states, South Dakota does not have corporate income tax or a state franchise tax.
Registered agent in South Dakota
Your registered agent in South Dakota is your point of contact with local authorities. If you don’t have a physical address for your company in South Dakota, it may be advantageous to find a registered agent to receive state notices on your behalf.
Foreign corporations are required to have a registered office in South Dakota. The office cannot be a P.O. box, rather it must be a physical address of your registered agent or a licensed registered agent service.
Your registered agent will forward any important information, such as business mail, to you. There are a number of firms that contract out registered agents. They typically cost $50 – $100 per year.
Annual reporting in South Dakota
Every year, you must file a statement with the State, updating any changes to the company address or the composition of the Board and officers. You’ll include info like:
- The legal name of your business
- The name and address of your registered agent
- The names and addresses of board members, managers, and officers
The filing fee for the annual report is $50 for online filings.
Registering for sales tax in South Dakota
If you meet the requirements to collect sales tax in South Dakota, you will need to apply for a state tax license. South Dakota provides two ways for you to register to collect sales and use tax depending on what is best for your company:
- South Dakota Department of Revenue has an online application system which allows you to register for only South Dakota sales and use tax collection.
- Streamlined Sales Tax Registration System lets you register for sales tax for multiple states. South Dakota is part of this system so you can register to collect South Dakota sales and use tax through the Streamlined Sales Tax Registration System.
Hiring and paying employees in South Dakota
When you hire a new employee in South Dakota, federal and state laws require that you report new hires within 20 days of their first day of work for wages. You can report your new hires online.
Your payroll provider should be able to take care of paycheck withholdings, but it’s up to you to register as an employer with the State and set up an online employer account.
For a comprehensive guide of your responsibilities, South Dakota provides the following information.
The easiest way to register your business in South Dakota
To register your business in South Dakota, you’ve got to keep track of a lot of moving parts. Failing to file the right forms, provide the right information, or stay on top of compliance laws can lead to serious headaches.
Capbase makes it easy. When you incorporate your Delaware corporation on Capbase, we will generate the required information needed to register to do business in South Dakota and keep you up to date on any required filings.
The compliance calendar inside your Capbase account will notify you of upcoming fees, reporting, or other requirements, so you can keep your startup in good standing with South Dakota state officials. Try Capbase now.
Written by Greg Miaskiewicz
Security expert, product designer & serial entrepreneur. Sold previous startup to Integral Ad Science in 2016, where he led a fraud R&D team leading up to a $850M+ purchase by Vista in 2018.
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