South Dakota Association of School Business Officials SOUTH DAKOTA DEPARTMENT OF REVENUE South Dakota Association of School Business Officials April 2019 Nick Rea

Sales Tax Exempt Entities Public Schools – Government Out-of-State Schools exempt as long as reciprocity Private Schools & Private Religious Schools 501(c)3 nonprofit Physical location in South Dakota Must apply for an exemption number from DOR

Purchases – Exempt or Taxable? Exempt Purchases School funds – School purpose Examples: books, desks, computers, equipment, Uniforms for sports or band

Purchases – Exempt or Taxable? Taxable Purchases Personal items for students or staff Examples: class rings, school pictures, school jackets, t-shirts, or uniforms sold to students Employee Reimbursable Fundraising Merchandise The School owes sales tax at time of purchase or use tax if not charged Examples: food for concession stands, fruit, candy, wrapping paper

Purchases – Exempt or Taxable? Licensed Suppliers If the business is not licensed, the school will owe use tax The school does not need to furnish a certificate of exemption to their suppliers, they are owned and operated by governmental agencies, exempt under SDCL 10-45-10

School Organizations – Taxable School organization purchases are taxable School exemption does not carryover Tax due even if purchase is given to school Booster clubs, student organizations, foundations PTA/PTO, Student Council, FBLA, FFA

Sales – Exempt or Taxable? Exempt Sales Educational Services Student activity or class fees Food Service for Elementary & Secondary (School Food Service Program) The school’s receipts from the sale of food to students Admissions to school events When the entire net proceeds are spent for educational purposes Fundraising sales The school or organization does not owe sales tax on their profit from the sale of these products.

Sales – Exempt or Taxable? Taxable Sales Food Service at Colleges & Universities Surplus sales Buildings built in shop class Sales to staff, students or others which are not part of education services

Sales – Exempt or Taxable? Exempt or Taxable? – “Well, it depends” Camps Where do the net proceeds go? Net Proceeds all for educational purposes – Exempt Net Proceeds not all for educational purposes - Taxable

Sales – Exempt or Taxable? Exempt or Taxable? – “Well, it depends” School Travel Who’s paying? Payments made directly from school funds, by a school check or school credit card - Exempt When paid for by the individual, even if the individual is reimbursed by the school for the expenses - Taxable

Construction (new & remodel) What is Contractors’ Excise Tax? 2% tax on contractors providing construction services Why aren’t school projects exempt? The tax is on the contractor

Construction What else do I need to know? Materials & equipment provided by the school to the contractor Contractor will owe 2% contractors’ excise tax on the value of the materials & equipment Contractor will owe sales/use tax on the value of the materials & equipment

Wrapping it up Schools are sales tax exempt Most purchases are exempt but some should be taxed School organizations are not sales tax exempt Sales – taxable or exempt?…it depends Construction – be aware of contractors’ excise tax

Information Read All About It! http://dor.sd.gov Videos, Publications, Guides Contact Us 1-800-829-9188 BusTax@state.sd.us Local offices: Aberdeen, Mitchell, Pierre, Rapid City, Sioux Falls, Watertown & Yankton

South Dakota Department of Revenue Questions? South Dakota Department of Revenue Sign-up for our E-Newsletter @SDRevenue South Dakota DOR Nick Rea Nicholas.Rea@state.sd.us 605-773-8211