Payroll South Dakota, Unique Aspects of South Dakota Payroll Law and Practice
Unlike most other states, South Dakota is not part of the state payroll tax. Instead, employers must pay a separate federal payroll tax to cover the state's share of Social Security and Medicare taxes. Employees in South Dakota are required to report their earnings at least once each quarter in order to establish an employer federal contribution record. The burden of this requirement falls on employees. Cash salary payments cannot be made "on account" for this purpose; however, employers can deduct cash salary payments from wages for their records and then make a deposit with the appropriate agency within 10 days after payday each week or month after payday if it has been more than 10 days between paydays that quarter. Monetary contributions of cash or other property made directly to the state share of Social Security or Medicare taxes by employers are not reportable wages for payroll tax purposes. However, if an employer makes a monetary contribution directly to the state share of Social Security and Medicare taxes through the use of a payroll deduction plan, it is considered an "employer payment" even though it is not reportable wages. Employers that make any payments must make sure that the payee receives written notice so that it can inform employees.
South Dakota self-employment tax is 5.3% on net profits from businesses you own, operate, and where 50% or more of your stock is owned by your business; 10.05% if you are a limited partner. Remittance is either quarterly or annually, depending on the amount of the payment.
South Dakota does not have a state sales or use tax, but local governments may charge their own sales or use taxes.
Payroll-Taxes This article gives an overview of how to comply with South Dakota's payroll tax obligations as they apply to employers and employees in the state. It is intended as a general guide and should not be construed as legal advice pertaining to any specific situation. Employers must verify all information and complete their own payroll tax returns when filing them with the state.
N.B. State laws contain references to paying pensions to employees as a part of "other remuneration." These references are as follows: S.D. Codified Laws Ch. 66-1, Deductions for Pension Payments; S.D. Codified Laws Ch. 66-2, Employer Contribution to Public Employees Retirement System; and S.D. Codified Laws Chs. 71-65-71-69, South Dakota Public Employee Pensions and Deferred Compensation Act (PADC). Where are these payments classified for the purposes of determining the requirements for payroll taxes? The federal laws and regulations governing these types of payments state: "Employers will recognize compensation to an employee on a quarterly or monthly basis upon presentation of appropriate documentation." S.D. Codified Laws Ch. 66–1, Deductions for Pension Payments. This indicates that these payments are reported as wages; therefore, they should be reported as wage deductions in the same manner as other wages are deducted from employees' paychecks. S.D. Codified Laws Chs. 71-65-71–69 PADC. The section of law that addresses the reporting requirements for public employees states: "All payments to employees by the employer will be reported on a regular basis and shall be reported in accordance with the rules [provisions] of this act." S.D. Codified Laws Chs. 66-2, Employer Contribution to Public Employees Retirement System. This indicates that these payments are reportable as income; therefore, they should be reported in the same manner as other wages are reported in Box 1 of Form W–2. S.D. Codified Laws Chs. 66-2, Employer Contribution to Public Employees Retirement System. This article is the publisher's interpretation of the payroll tax laws of South Dakota as they apply to employers and employees in that state. It should not be construed as legal advice pertaining to any specific situation and should not be relied upon without reference to primary sources of law and regulation, including South Dakota Codified Laws, federal laws and regulations, IRS Revenue Rulings, or Treasury Department Regulations or Internal Revenue Bulletins.
Note A: These are estimated employer match rates for employee retirement contributions paid by an employer on behalf of its employees during the calendar year in which compensation was earned. The rates were calculated using the IRS' March 2018 Contribution Rate Tables and the 2018 South Dakota Public Employees Retirement Association (SDPERA) Plan Rates.
Note B: These are estimated employer match rates for employee retirement contributions paid by an employer on behalf of its employees during the calendar year in which compensation was earned. The rates were calculated using the IRS' March 2018 Contribution Rate Tables and the 2017 South Dakota Public Employees Retirement Association (SDPERA) Plan Rates.
Note C: These are estimated employer match rates for employee retirement contributions paid by an employer on behalf of its employees during the calendar year in which compensation was earned. The rates were calculated using the IRS' March 2017 Contribution Rate Tables and the 2017 South Dakota Public Employees Retirement Association (SDPERA) Plan Rates.
Note D: These are estimated employer match rates for employee retirement contributions paid by an employer on behalf of its employees during the calendar year in which compensation was earned. The rates were calculated using the IRS' March 2018 Contribution Rate Tables and the 2018 South Dakota Public Employees Retirement Association (SDPERA) Plan Rates.
Note E: These are estimated employer match rates for employee retirement contributions paid by an employer on behalf of its employees during the calendar year in which compensation was earned. The rates were calculated using the IRS' March 2018 Contribution Rate Tables and the 2017 South Dakota Public Employees Retirement Association (SDPERA) Plan Rates.
Note F: These are estimated employer match rates for employee retirement contributions paid by an employer on behalf of its employees during the calendar year in which compensation was earned. The rates were calculated using the IRS' March 2017 Contribution Rate Tables and the 2017 South Dakota Public Employees Retirement Association (SDPERA) Plan Rates.
Conclusion: The November 2013 federal tax law (the Tax Increase Prevention Act of 2013) caused the personal income tax brackets to decrease from 10 percent, 25 percent, and 28 percent to 10 percent, 12.5 percent, and 22.5 percent. As a result, the South Dakota state tax brackets were also affected by this federal change in rates effective for taxable years beginning on or after January 1, 2014.
Absent any further guidance from the IRS, accountants should map the federal bracket changes to their state's brackets after making appropriate adjustments for South Dakota's higher standard deduction and personal exemption amounts. For example, in 2014 South Dakota's highest bracket was reduced from 38.