If you’re planning to sell clothing in South Dakota, you may be asking, “Is clothing taxable in South Dakota?” Unlike a few states that offer broad exemptions, South Dakota generally applies sales tax to most clothing purchases, though certain exceptions may apply.
For retailers, e-commerce sellers, and tax professionals, understanding these rules is crucial to ensure accurate pricing, proper tax collection, and timely filing. In this article, we’ll explain how South Dakota handles clothing sales tax, outline possible exemptions, and clarify what these rules mean for your US sales tax compliance.
Is Clothing Taxable in South Dakota?
Yes, clothing is taxable in South Dakota. Under state tax law, clothing is classified as tangible personal property, meaning it is subject to the state’s sales tax unless specifically exempt from taxation. The rules apply equally to:
- Retailers operating brick-and-mortar clothing stores in the state.
- E-commerce sellers shipping clothing to customers in South Dakota.
- Remote sellers who meet the state’s economic nexus threshold.
South Dakota’s tax rules are straightforward: there are no general exemptions for clothing purchases. This means all standard apparel, including shirts, pants, jackets, and shoes, is taxed at the same rate as other tangible goods.
The only exemptions available are for specific institutional buyers, such as government agencies, public schools, and qualifying nonprofit organizations. These buyers must provide an official exemption certificate at the time of purchase. Without this documentation, sellers are required to collect tax.
For businesses, the key takeaway is that if you sell clothing in South Dakota, you need to charge sales tax on it, unless a specific, documented exemption applies.
South Dakota Sales Tax Rate on Clothing
The South Dakota state clothing sales tax rate is currently 4.2%, reduced from 4.5% in recent years. This rate applies to all taxable sales of clothing, whether the transaction occurs in person or online.
In addition to the state rate, local jurisdictions, including cities and counties, may impose their own local sales taxes. These typically range from 0% to 2%, although some sources suggest certain areas can approach 3%.
Examples:
- Sioux Falls: State rate 4.2% + city rate 2% = 6.2% total.
- Pierre: State rate 4.2% + city rate 2% = 6.2% total.
- Small rural areas: May have no additional local rate, meaning only the state tax applies.
South Dakota does not have a special reduced tax rate for clothing, unlike states that may treat apparel differently from other consumer goods. Clothing is taxed at the same rate as other general tangible property.
For businesses, it’s essential to note that local sales tax rates apply based on the customer’s location, whether that’s the store location for in-person sales or the shipping address for online sales.
What Are South Dakota’s Exemptions and Special Cases for Clothing?
One area where South Dakota stands out is in its lack of general clothing exemptions. In many states, basic apparel or children’s clothing may be exempt from sales tax, or items under a certain price threshold may be taxed at a reduced rate. South Dakota does not offer these exemptions.
Here’s what you need to know:
- No basic clothing exemption – All apparel is taxable, regardless of type, style, or intended use.
- No price-based exclusion – Whether a shirt costs $5 or $500, it’s subject to the same tax rules.
- No seasonal tax holidays – South Dakota does not have designated sales tax holidays for clothing purchases. Retailers cannot offer temporary tax-free promotions based on state exemptions.
- Institutional exemptions – Certain entities can buy clothing tax-free, but they must be qualified and provide documentation:
- Public schools.
- Government agencies.
- Nonprofit organizations with approved exempt status.
Retailers need to verify exemption certificates before processing a tax-free sale. Maintaining proper records is essential in the event of a state audit.
Specialized clothing, such as protective gear, uniforms, or sports apparel, is taxable unless purchased by a qualifying exempt organization.
Tax on Clothing in South Dakota: Local vs. State
The statewide sales tax on clothing is 4.2%, but this is only part of the total rate customers may pay. South Dakota allows local governments to impose additional taxes.
- State tax: Applies statewide in South Dakota at a rate of 4.2%.
- Local taxes: Cities and counties can add between 0% and 2%, increasing the total rate.
- Combined rates: The most populated areas have combined rates ranging from 5.2% to 6.2%.
For example:
- If you operate a store in Sioux Falls, you must collect 6.2% on all taxable clothing sales.
- If you ship an online order to a customer in a rural county with no local tax, you only collect the 4.2% state rate.
Some municipalities may also impose a gross receipts tax in addition to sales tax, depending on the nature of the business. Businesses should consult the South Dakota Department of Revenue for the current local rate charts.
Sales Tax Registration Requirements for Clothing Sellers in South Dakota
If you sell taxable clothing in South Dakota, you must register for a sales tax license before making sales. This applies to:
- Brick-and-mortar stores located in the state.
- E-commerce sellers with a physical presence in South Dakota.
- Remote sellers meeting the economic nexus threshold.
Registration process:
- Go to the South Dakota Department of Revenue website.
- Complete the online sales tax license application.
- Provide your business name, contact details, EIN, and expected sales figures.
- Pay the one-time license fee (about $20).
- Please wait for approval, which typically takes 2–4 weeks.
Once approved, you are legally authorized to collect and remit sales tax at the South Dakota clothing rates. You must display your license at your business location and keep it up to date.
Sales Tax Filing Requirements for Clothing Businesses
After registration, businesses must file sales tax returns according to their assigned frequency:
- Monthly – High-volume sellers.
- Quarterly – Moderate sales volume.
- Annually – Low-volume sellers.
Key filing details:
- Paper returns are due by the 20th of the month following the reporting period.
- Electronic returns and payments are due by the 25th of each month.
- Late filings can incur penalties and interest.
- Extensions are possible but require valid justification and approval from the state.
All returns must include both state and local tax collected during the reporting period. Businesses should maintain accurate records to avoid errors and audit issues.
Implications for Remote Sellers and E-Commerce Clothing Sales
If you sell clothing to South Dakota customers but operate from another state, you may still have to collect South Dakota clothing sales tax under the state’s economic nexus law.
- Threshold: $100,000 in annual South Dakota sales.
- No transaction count rule – The old 200-transaction threshold was removed in July 2023.
- Timeline: Once the threshold is exceeded, register within 30 days and start collecting tax from the first day of the following month.
Remote sellers must collect tax based on the customer’s shipping address. This means they may need to charge different rates for different locations within South Dakota.
Failure to comply can result in penalties, interest, and back taxes owed.
Sales Tax Compliance Challenges for Clothing Businesses in South Dakota
While South Dakota’s clothing tax rules are relatively simple, compliance can still present challenges:
- Local rate variations – Tracking changing rates across cities and counties can be difficult without automation.
- Economic nexus monitoring – Out-of-state sellers must monitor sales to determine when they meet the $100,000 threshold.
- Exemption documentation – Properly collecting and storing exemption certificates for institutional buyers is critical.
- No tax holidays – Since all clothing sales are taxable year-round, businesses must consistently apply sales tax.
These challenges can increase administrative work, especially for multi-location retailers and online sellers.
How Automation Helps Manage South Dakota Sales Tax
Utilizing sales tax automation tools, such as Commenda, can significantly simplify sales tax compliance in South Dakota.
Benefits include:
- Automated rate calculation for both state and local taxes.
- Automatic updates when rates change.
- Integrated filing of sales tax returns with electronic submission.
- Exemption management for qualifying buyers.
- Multi-location and e-commerce support, ensuring consistent compliance across all sales channels.
By automating tax collection and reporting, businesses reduce errors, save time, and ensure they meet all South Dakota sales tax requirements.
Ready to make your South Dakota sales tax compliance effortless? Book a free demo call with Commenda today to see how our solution can help you calculate, collect, and file taxes with complete accuracy, so you can focus on growing your clothing business.
FAQs
Q. Are clothing accessories taxable in South Dakota?
Yes. In South Dakota, most clothing accessories are taxable, including items like belts, hats, handbags, scarves, and jewelry. These are treated separately from exempt clothing categories and are subject to the same state and local sales tax rates.
Q. Is there a threshold for taxable clothing sales in South Dakota?
No. South Dakota does not have a sales tax threshold for in-state businesses; all taxable sales must include applicable sales tax from the first dollar. However, for remote sellers without a physical presence in the state, South Dakota’s economic nexus threshold is $100,000 in sales or 200 separate transactions annually.
Q. How do South Dakota sales tax rules apply to children’s clothing?
Children’s clothing in South Dakota is generally taxable at the same rate as adult clothing unless a specific exemption applies. There is no standard exemption based solely on age or size of the apparel.
Q. Are there specific rules for clothing sold at a discount in South Dakota?
Yes. Sales tax is calculated on the final selling price, after any store discounts have been applied. However, manufacturers’ coupons or rebates may have different rules depending on who reimburses the discount, so sellers should keep clear records.
Q. Does South Dakota exempt clothing purchased for resale from sales tax?
Yes. Clothing purchased for resale is exempt if the buyer provides a valid South Dakota resale exemption certificate. Businesses must retain this documentation for audit purposes.
Q. How do South Dakota sales tax exemptions apply to used clothing?
Used clothing is taxable in South Dakota, unless it is sold by a qualifying nonprofit organization or during certain designated charitable events. For-profit thrift and consignment stores are required to charge sales tax on used apparel.
Q. Are clothing alterations taxable in South Dakota?
Yes. Alteration and tailoring services are generally considered taxable services in South Dakota when performed on taxable clothing. The tax applies to the total charge for the service.
Q. Do South Dakota sales tax rules apply to out-of-state sellers selling clothing online to South Dakota residents?
Yes. Out-of-state sellers must collect and remit South Dakota sales tax if they meet the economic nexus threshold of $100,000 in annual sales or 200 transactions. This applies to online, catalog, and other remote sales to customers in South Dakota.
