Farmers Market Operation: Sales Tax Back »

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Written by Sierra Blachford under the direction and review of Chris Zdorovtsov (Former SDSU Extension Community Vitality Field Specialist).


Do I Need a Sales Tax License?

If a vendor plans to sell any kind of tangible personal property (TPP), products delivered electronically, or provide a taxable service a sales tax license must be obtained. This includes sales in person, at special events, by phone, internet, or catalog. There is no minimum sales amount required before becoming licensed. No fee is charged for a sales tax license.

If a vendor only sells products during a few months of each year, the South Dakota Department of Revenue may issue a temporary sales tax license. In this situation, at the end of the selling season the license is temporarily canceled. If the vendor continues to sell products the next year, contact the Department to reinstate the license. 

If a vendor sells at only one or two events a year, a tax license is not needed. However, vendors are still responsible for collecting and paying sales tax, and may do so on the Special Event Return that will be available at that event. If a form is not provided, please call 1-800-829-9188. If market managers have special vendors that only sell a few times each season, the manager can contact the SD Dept. of Revenue to obtain Special Event Returns for the vendors.

In addition to sales tax, vendors may also owe a “use” tax. If a vendor purchases any products or services that will not be resold and sales tax is not paid at the time of purchase, the vendor must pay the state and municipal use tax on the cost of the product, including shipping charges.

Fertilizer sold in quantities of 500 pounds or more in a single sale is exempt when sold for use in growing food on agricultural land. If the purchaser meets these qualifications, they must give the seller a completed Exemption Certificate. For specific information about agricultural exemptions visit the SD Dept. of Revenue website. Then, click “Agricultural Equipment & Services.”

How Do I Apply for a Sales Tax License?

Vendors can apply for a sales tax license by visiting the SD Dept. of Revenue website, and searching for “sales tax license.” If a vendor cannot apply online, please call 1-800-829-9188 for help. If sales are made on an Indian Reservation or in Indian Country, please contact the Tribal Government’s Revenue office for additional license requirements. In some instances, there may be additional permits or licenses needed. Each vendor’s tax license must be displayed at all market selling days.

In conclusion, state law requires that each vendor’s tax license be displayed at all market selling days.

Vendor Taxes

As a seller of products and services, it is the responsibly of the seller to collect and remit the following taxes:

  • State Sales and Use Tax rate: 4%
    • Applies to all taxable sales delivered in South Dakota.
  • Municipal Sales and Use Tax rate: varies from 1 to 2%
    • Applies to all taxable sales delivered inside a city that has a municipal tax.
    • Specific municipal rates can be found on the SD Dept of Revenue website.
  • Municipal Gross Receipt Tax rate: 1%
    • Prepared food for immediate consumption is subject to the municipal gross receipt tax because the vendor is now considered an eating establishment. This includes any food mixed or heated by the vendor or any item that requires a plate, bowl, or glass to serve. Examples include: coffee, cookies, cupcakes, and sandwiches.     
    • Applies to all sales at concession stands or eating places.
    • Food that generally requires future preparation by the consumer, such as cooking, heating, or combining with other food products is not prepared food for immediate consumption.
    • This tax is in addition to the Municipal Sales and Use Tax. Some cities elect to have a Municipal Gross Receipt tax, while others do not apply this tax. The Municipal Gross Receipts Tax may apply to any or all of the following depending on the community: alcoholic beverages; eating establishments; lodging accommodations; and admissions to places of amusement, athletic and cultural events.
    • For more information on prepared foods and taxes, visit the SD Dept of Revenue website, and search “Prepared Foods.”
  • Tourism Tax: 1%
    • Vendors do not owe tourism tax on products sold at a Farmers Market, unless the market is at a visitor attraction or a spectator event, such as a concert, rodeo, or craft show. In those situations, the vendor would owe the tourism tax.

Market Applicable Taxes

  • Stall Fees or Dues
    • If a market collects a fee from their vendors for stalls or dues for market membership, they may owe sales tax on the fees or dues. To determine the tax liability, contact the SD Dept. of Revenue or the Regional Revenue office the area. The process may unique for each market situation.
  • Entertainment
    • Entertainment, such as musicians, clowns or DJ’s, is sometimes provided at a farmers market. If a fee is charged for admission to the entertainment, these funds are subject to state sales tax, municipal sales tax, and municipal gross receipts tax.
    • If no admission is charged, but entertainment is furnished, the fee charged by the entertainer is subject to the state and municipal sales tax, but is not subject to the municipal gross receipts tax.

When Do Taxes Not Apply?

The municipal tax does not apply when the product is sold and delivered outside of city limits. All sales sold and delivered in South Dakota, but outside city limits are still subject to state sales tax.

Tourism Tax does not apply to sales at a Farmer’s Market, unless the market is part of a visitor attraction or spectator event.

Sales for Resale: If a vendor has a sales tax license and purchases a product with the intent to resell the item to the end consumer, the product may be purchased without sales and use tax.  Vendors must provide the supplier an Exemption Certificate. To obtain an Exemption Certificate, contact the SD Dept. of Revenue. Suppliers need to keep the Exemption Certificate as documentation for three years.

Who Can Purchase Without Tax?

According to South Dakota state law, the sales of products and services to the following entities are exempt from state sales and use tax:

  • Tribal governments
  • United States government agencies
  • State of South Dakota
  • Public or municipal corporations of the State of South Dakota
  • Municipal fire, volunteer fire, or ambulance departments
  • Public schools, including K-12, universities, and technical institutes that are supported by the State of South Dakota or public or municipal corporations of South Dakota.

Government entities, including Tribal Governments, must provide a Certificate of Exemption to the vendor or the vendor must keep documentation to show the purchase was paid from government funds. Documentation may include a purchase order or a copy of a check.

In South Dakota, churches are not exempt from sales tax. Additionally, sales to tribal members are subject to sales tax, unless they provide an Exemption Certificate. 

How Do I File?

  • Special Event Form
    • After the event, complete the form and send it with payment of taxes due to the Department of Revenue at the address provided on the form.
  • Sales Tax
    • If a vendor has a sales tax license, file by following the directions from the SD Dept. of Revenue. These directions vary by situation. Instructions were explained when the license was originally issued. Depending on how often a vendor sells and the selling season length, the reporting requirement may differ. Vendors will be sent a preprinted return form when it is time to report. Taxes may be reported and paid electronically, using SD EPath

Keep track of all receipts for each location in which sales were made. State and municipal taxes are reported on the same form. When filling out the form, each city has a unique code for their municipal tax rate and for the municipal gross receipts rate. Report receipts from each city under the appropriate codes for that city.

How Do I Calculate And Collect The Sales Tax?

The sales tax is collected at the time of sale. It may be added to the price of the product. For example, when a product sells for $5.00, add 6% sales tax for a total of $5.30.

Or, vendors may decide to price products so that the sales tax is included in the price. This can make the process of making change for customers quick and simple. If a vendor decides to use this method post a sign saying, “All prices include sales tax” or “Tax Included.” Then, remember to remove or “back out” the sales tax when filing and paying sales taxes.

Calculation Examples

  • Example One: ‘State Sales & Use Tax’, ‘Municipal Sales & Use Tax’, and ‘Municipal Gross Receipt Tax’ for city of Pierre
     

    Product sale price:  $100
    State Sales and Use Tax: .04
    Pierre Municipal Sales Use Tax: .02
    Pierre Municipal Gross Receipts Tax: .01
    Total Tax Rate: .07 or 7%  ($100 X .07 = $7 tax)

    Collect $107 from the customer. Report $100 on line 1 of the tax return, under the Pierre municipal tax code and the Pierre municipal gross receipts tax code and pay $7 tax.

  • Example Two: Tax included in price
    If taxes are included in the price, receipts should include the product price and the sales tax. To determine how much to report as sales, remove the sales tax from the receipts.

    Product sale price: $500.00, including sales tax.
    (4% state sales tax, plus 2% Pierre municipal sales tax)
    To remove the 6% tax, divide $500.00 by 1.06
    Taxable receipts = $471.70 
    Tax due on $471.70 at 6% = $28.30

    Collect $500 from the customer. The vendor should report $471.70 on line 1 of the tax return and under the Pierre municipal sales tax code and pay $28.30 tax.

    Do not include receipts from nontaxable sales when subtracting tax out of receipts.

Where can I find additional information on taxes?

South Dakota Farmers Market Online Guidebook

This article is a portion of the South Dakota Farmers Market Online Guidebook.

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