The Tax Cycle - When a purchase is made within the city limits, the retailer adds the applicable taxes on to the purchase price. The retailer is required to report and transfer all monies collected for taxes to the Department of Revenue on a regular basis. The reporting period varies, some businesses may report their tax collections every month and some may be allowed to report every three months.
The Department of Revenue determines how the taxes are to be dispersed between the state and the cities where the taxes were collected. Twice each month, the Department of Revenue prepares a report for the city and funds are sent to the Municipal Finance Office. Variables in sales tax allocations include:
- Amounts for Contractors' Excise Tax
- Length of the reporting period for each business
- Miscellaneous payments
- Deductions for administrative fees
- Deductions for food tax refunds
Because of these variables in reporting, it is nearly impossible to compare a specific period of tax receipts to a similar period in another year. Total tax revenues are not known until all the reporting periods for the year (24 total) are recorded. The final tax payments are made in January each year. Only after all collections have been reported for the entire year, can an accurate comparison be made.
State Taxes:
The State of South Dakota imposes a 4% tax on most goods and services. In addition, a 1.5% tax is applicable to select Tourism related goods and services (Tourism Tax).
Municipal Taxes:
South Dakota law (SDCL 10-52 and 10-52A), allow cities the option of imposing additional sales or use taxes. These taxes apply if a transaction occurs within a city imposing a tax, and if an item is subject to the state sales/use tax. The City of Sturgis has a 2% tax.
Gross Receipt Tax (BBB): An additional 1% tax is imposed on specific purchases such as lodging, eating establishments, alcoholic beverages and admission to places of amusement as well as athletic and cultural events. Cities can choose to apply the tax to any or all of these activities.
Contractor's Excise Tax: When a contractor performs construction services or makes a realty improvement and charges a customer for the work, the contractor is responsible for the 2% contractors’ excise tax and must have a contractors’ excise tax license.
How Tax Money is Used
Sales tax money helps fund city and state governments. When the City of Sturgis prepares the annual budget, they take into account the funds collected from sales tax as well as property taxes that are collected from property owners.
Sales tax money helps to pay for services like snow removal, police and fire protection, libraries and maintenance at our parks. When a community gets a new business, they are able to collect more taxes which allows the government to rely less on property tax and still provide a good level of service to the community.
It's critical for residents in a community to realize how important their tax revenues are. When you make a purchase in another community, your tax dollars go to that community, not the one where you live.
More Information
The South Dakota Department of Revenue is responsible for reporting all sales tax activities. Their web site contains abundant information about the processes used to calculate, collect and distribute sales tax. Visit the Department of Revenue website: http://www.state.sd.us/drr2/businesstax/bustax.htm