64:06:01:00.  Definitions. The terms used in this chapter mean:

          (1)  "Transitory business," a business which engages in the vending, distribution, or sale of tangible personal property or products transferred electronically, or renders services at any place in the state for less than 45 days and does not become a permanent and continuous business in this state;

          (2)  "Seasonal business," a business which is carried on only during certain seasons or during definite segments of the year, not  throughout an entire year;

          (3)  "Transient solicitor," a person who engages in the vending, distribution, or sale of tangible personal property or products transferred electronically, or renders services at any place in the state temporarily and is not a resident of this state.

          Source: 2 SDR 40, effective December 8, 1975; 7 SDR 80, effective February 22, 1981; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1(3), 10-46-35.1(3), 10-46A-19(3), 10-46B-18(3).

          Law Implemented: SDCL 10-1-13.

          Declaratory Rulings: Receipts from the sale of membership cards, which are required before individuals may shop for groceries in warehouse stores and which may be exchanged for merchandise worth approximately one-half of the value of the card, are not exempt from the sales tax which must be paid on the full cost of the membership cards. Secretary of Revenue Declaratory Ruling No. 80-8.

          Production of bedding and ornamental plants in a greenhouse is not an "agricultural purpose," as defined in SDCL 10-45-1(8), and fuel used to heat the greenhouse is subject to the sales tax. Secretary of Revenue Declaratory Ruling 81-7.

          64:06:01:01.02.  Sales to governmental agencies. Before purchases by a government or its subdivisions are exempted by the department, proof is required from the retailer that such sales were actually paid out of government funds or that the governmental agency provided an exemption certificate to the retailer.

          No special exemption certificate is necessary when making sales to the United States, tribal governments, the District of Columbia, the State of South Dakota, other states, and their subdivisions if the billing or invoices indicate such sales and the records show that payment was received from the exempt governmental entity or that the purchases were made by a credit card issued to and in the name of the exempt governmental entity.

          State boards and commissions created by law are exempt from sales or use tax. Boards and commissions created by legislative act are part of state government and sales to any board or commission are sales to the state.

          This exemption does not extend to sales to or purchases of tangible personal property or any product transferred electronically for the personal use of officials, members, or employees of such institutions.

          Source: SL 1975, ch 16, § 1; 2 SDR 40, effective December 8, 1975; 8 SDR 81, effective January 10, 1982; 11 SDR 1, effective July 19, 1984; 13 SDR 129, 13 SDR 134, effective July 1, 1987; transferred from § 64:06:01:48, 16 SDR 76, effective November 1, 1989; 19 SDR 42, effective September 29, 1992; 21 SDR 219, effective July 1, 1995; 22 SDR 6, effective July 23, 1995; 29 SDR 177, effective July 2, 2003; 30 SDR 58, effective November 5, 2003; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1(3).

          Law Implemented: SDCL 10-45-10.

          Declaratory Ruling: The sales tax exemption from receipts of sales of tangible personal property to governmental agencies also applies to the gross receipts from sales of services to governmental entities. Secretary of Revenue Declaratory Ruling No. 79-3.

          Court Decisions: A nonprofit corporation exempt from federal income tax, which provides free legal service to persons of low income and is funded by the federal government, qualifies as a relief agency under SDCL 10-45-10 and does not have to meet each factor enumerated in § 64:06:01:38. East River Legal Services vs State, Department of Revenue, 303 N.W. 2d 379 (March 18, 1981).

          A nonprofit corporation exempt from federal income taxes, which provides health and nutrition services for the elderly; education and development services for "headstart" and day care for children; weatherization, self-help gardens, and fuel assistance services for low income and elderly families; employment services for low income persons; and assistance and guidance to low income persons for community development, all without cost to recipients except for certain day care services, the activities of which are financed by the federal government, qualifies as a relief agency and is exempt from having to pay sales tax. Western South Dakota Community Action Program, Inc. vs State, Department of Revenue, 303 N.W. 2d 379 (March 18, 1981).

          64:06:01:01.03.  Sales by United States government. The United States government is not required to collect tax from the purchaser when making sales otherwise subject to sales tax unless the United States Congress has provided otherwise. Persons making purchases from the government of the United States or from any of the exempt agencies of tangible personal property, any product transferred electronically, and services that are subject to sales or use tax must report and pay sales or use tax measured by the purchase price unless the purchases are otherwise exempt.

          Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; transferred from § 64:06:01:52, 16 SDR 76, effective November 1, 1989; 21 SDR 219, effective July 1, 1995; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1(3), 10-46-35.1(3).

          Law Implemented: SDCL 10-45-10, 10-46-4.

          64:06:01:02.  Bond. A cash bond endorsed in the name of the department or a bond issued by a corporate surety company authorized to do business in South Dakota in an amount sufficient to guarantee payment of tax for a six-month period is required from retailers engaged in business within the state of South Dakota in the following circumstances:

          (1)  A taxpayer is delinquent in either reporting or paying tax for two reporting periods in any twelve-month period;

          (2)  A taxpayer is engaged in a type of business which, in the experience of the department, has had problems with tax delinquency; or

          (3)  A taxpayer does not have sufficient unencumbered assets in this state to ensure that a possible future delinquent tax liability is collected.

          If a taxpayer has no prior history of tax payment, the amount of the bond is based upon the taxpayer's estimate of gross receipts in a six-month period, provided that the taxpayer's estimate is determined by the department to approximate known receipts of similar businesses.

          Source: SL 1975, ch 16, § 1; 2 SDR 40, effective December 8, 1975; 5 SDR 60, effective January 25, 1979; 9 SDR 28, effective September 5, 1982; 11 SDR 1, effective July 19, 1984; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(1), 10-45D-13(1), 10-46E-11(1), 10-52A-7(1).

          Law Implemented: SDCL 10-45-24, 10-45-26, 10-45D-12, 10-46E-8, 10-52A-6.

          64:06:01:03.01.  Bad checks. A check which is returned unpaid because of nonsufficient funds (NSF) or no account and which is not collected by the retailer may be taken as a bad debt deduction, or may be considered a reduction in gross receipts.

          Source: 16 SDR 76, effective November 1, 1989; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 29 SDR 177, effective July 1, 2003; 32 SDR 225, effective July 3, 2006; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-45-47.1(3), 10-45D-13(3), 10-46E-11(2), 10-52A-7(3).

          Law Implemented: SDCL 10-45-1.14, 10-45-30, 10-45D-2, 10-46E-8, 10-52A-1.1.

          64:06:01:05.  Change in ownership. If the ownership status of a business which holds a tax permit changes from one type of business ownership such as sole proprietor, partnership, or corporation to another type of business ownership, a new tax permit is required. The new owner must apply for the new permit.

          A new tax permit is required for corporations which are sold or transferred only if ownership of the business is transferred to a different corporation or other owner.

          A new permit is not required for partnerships if one or more partners listed on the permit enters or leaves the partnership and the business continues to be operated under the partnership form. Those partners listed on the permit remain liable until the department is notified, in writing, of a change in the status of any partner. A new partner is automatically held liable for any partnership tax obligations to the state.

          Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 16 SDR 76, effective November 1, 1989; 19 SDR 42, effective September 29, 1992; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(1), 10-45D-13(1), 10-46E-11(1), 10-52A-7(1).

          Law Implemented: SDCL 10-45-24, 10-45D-12, 10-46E-8, 10-52A-6.

          64:06:01:07.  Issuance and use of permits restricted. A tax permit cannot be issued to a person solely for the purpose of permitting the person to buy at wholesale or to buy without payment of tax to the seller of property or services taxable under SDCL chapter 10-45, 10-45D, 10-46, 10-52, or 10-52A.

          Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 29 SDR 177, effective July 2, 2003; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(1), 10-45D-13(1), 10-46E-11(1), 10-52A-7(1).

          Law Implemented: SDCL 10-45-2, 10-45D-12, 10-46E-8, 10-52A-6.

          64:06:01:07.01.  Application for tax permit. All applicants for a tax permit shall include on the application form, in addition to the requirements set forth in SDCL 10-45-24, the following:

          (1)  The applicant's social security number, if the individual is the sole owner, and the applicant's federal identification number if the internal revenue service requires a federal identification number;

          (2)  The applicant's home and business telephone number;

          (3)  The type of business, with a brief description of that business;

          (4)  The type of license requested;

          (5)  The beginning date of business;

          (6)  Whether it is a new business;

          (7)  An estimated monthly taxable gross in this state;

          (8)  The type of accounting method used;

          (9)  The type of ownership;

          (10)  If it is a corporation, the date of incorporation;

          (11)  If not a South Dakota corporation, the date registered with the secretary of state;

          (12)  The names, addresses, and social security numbers of all principal officers if the business is a corporation or of all principal partners if the business is a partnership; and

          (13)  Other information required by the secretary to identify the business and the activities of the business.

          Source: 17 SDR 4, effective July 18, 1990; 28 SDR 178, effective July 1, 2002; 29 SDR 177, effective July 2, 2003; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(1), 10-45D-13(1), 10-46E-11(1), 10-52A-7(1).

          Law Implemented: SDCL 10-45-24, 10-45D-12, 10-46E-8, 10-52A-6.

          64:06:01:07.02.  Requirements for statewide tax permit. The department may only issue a statewide tax permit to businesses with identical ownership, the same federal identification number, the same Standard Industrial Classification number, and the same license type. The department may issue a statewide tax permit to businesses with different Standard Industrial Classification numbers if all the other requirements are met and the products or services being sold are the same even though the Standard Industrial Classification numbers are different. Any business requesting a statewide tax permit must maintain records that clearly show gross receipts, deductions, and municipal and tourism sales for each location reported under the statewide permit. Such records shall be stored and available at one location.

          Source: 27 SDR 9, effective August 7, 2000; 28 SDR 69, effective November 21, 2001; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(1)(4), 10-45D-13(1), 10-46E-11(1), 10-52A-7(1).

          Law Implemented: SDCL 10-45-24, 10-45D-12, 10-46E-8, 10-52A-6.

          64:06:01:08.  Exemption certificates. Receipts from the sale of tangible personal property or any product transferred electronically are presumed to be exempt if the buyer has furnished an exemption certificate. A new exemption certificate is not needed for each sale.

          Electricians, plumbers, and other similar contractors who maintain a retail store, in addition to contracting out their services, may purchase all electrical, plumbing, and related merchandise from jobbers, wholesalers, or manufacturers for resale and give an exemption certificate. All items removed from inventory and used in the performance of a contract are subject to use tax. Use tax on materials used in contract work must be paid on the cost of such materials.

          Electricians, plumbers, and other similar contractors who are not retailers may not hold a tax permit, but may take credit on their excise tax return for amounts paid to suppliers as sales tax if the item purchased is later resold rather than used. Sales must then be reported and tax paid on the amount of the sale.

          In order to purchase ingredient or component parts exempt from tax, processors and manufacturers must be licensed and must furnish their suppliers with exemption certificates.

          Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 15 SDR 58, effective October 19, 1988; 16 SDR 76, effective November 1, 1989; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1(4), 10-46-35.1(4), 10-46A-19(4), 10-46B-18(4).

          Law Implemented: SDCL 10-45-2, 10-45-2.4, 10-45-61, 10-46-2, 10-46-2.2.

          64:06:01:08.01.  Exemption certificates -- Forms accepted. The only acceptable forms for exemption certificates are the department's exemption certificate form, a substitute for this form that has the prior approval of the department, or the Multistate Tax Commission uniform sales and use tax certificate form, or the streamlined sales tax agreement certificate of exemption.

          Source: 15 SDR 58, effective October 19, 1988; 20 SDR 103, effective January 10, 1994; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 29 SDR 177, effective July 2, 2003; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-45-47.1(4).

          Law Implemented: SDCL 10-45-1(10), 10-45-2, 10-45-61.

          64:06:01:08.02.  Services as components of other services. Services which are an integral, inseparable component of services involving the manufacture, fabrication, processing, or manipulation of tangible personal property or any product transferred electronically are considered to be for resale. Receipts from the sale of a service for resale by the purchaser are not subject to sales tax provided the purchaser furnishes an exemption certificate. In order for the transaction to be a sale for resale, the following conditions must be present:

          (1)  The manufacturer, fabricator, processor, or manipulator does not use the service in any manner other than resale; and

          (2)  The service is delivered or resold to the ultimate customer without any alteration or change.

          Source: 15 SDR 58, effective October 19, 1988; 16 SDR 76, effective November 1, 1989; 18 SDR 3, effective July 14, 1991; 21 SDR 219, effective July 1, 1995; 24 SDR 180, effective July 1, 1998; 28 SDR 178, effective July 1, 2002; 33 SDR 226, effective June 27, 2007; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1(4), 10-46-35.1(4).

          Law Implemented: SDCL 10-45-1(10), 10-45-2.4, 10-45-4, 10-45-4.1, 10-45-20, 10-46-2.1, 10-46-2.2.

          Declaratory Rulings:

          The commissions and buyer's fees received by an auctioneer as a result of its auction services in the sale of tangible property for resale are gross receipts subject to the retail sales and service tax imposed by SDCL 10-45-4. The services are used and consumed by the sellers and buyers and are not resold to another party. Secretary of Revenue Declaratory Ruling 91-1, May 6, 1991.

          The engineering services provided by a technical services company to a company that builds and repairs building components are subject to tax pursuant to SDCL 10-45-4. They are not an integral, inseparable component of services involving the manufacture, fabrication, processing, or manipulation of tangible personal property. Secretary of Revenue Declaratory Ruling 92-1, September 11, 1992.

          Examples:

          (1)  ABC Manufacturing builds garden tractors. It does not have the capacity to paint the finished product, and hires Rainbow Paint Company to do so. The services of Rainbow are an integral part of the manufacturing process, and may be purchased by ABC for resale provided ABC furnishes an exemption certificate to Rainbow.

          (2)  Ace Mechanic contracts to repair a wrecked automobile. Ace repairs the damage except for the radiator which is taken to Sam's Radiator Service. Sam fixes the radiator and is paid by Ace. Ace then bills the owner of the vehicle for the repair work, which charge includes the sum paid to Sam. The amount paid by Ace to Sam would not bear tax if Ace gave Sam an exemption certificate. The entire amount paid by the owner to Ace is subject to tax.

          64:06:01:08.03.  Sale of service for resale. Services which are purchased by a service provider and delivered to a current customer in conjunction with the services contracted to be provided to the customer are considered to be for resale. Receipts from the sale of a service for resale by the purchaser are not subject to sales tax if the purchaser furnishes an exemption certificate.

          In order for the transaction to be a sale for resale, the following conditions must be present:

          (1)  The service is purchased for or on behalf of a current customer;

          (2)  The purchaser of the service does not use the service in any manner; and

          (3)  The service is delivered or resold to the customer without any alteration or change.

          Source: 18 SDR 3, effective July 14, 1991; 20 SDR 103, effective January 10, 1994; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-45-47.1(3), 10-46-35.1(3).

          Law Implemented: SDCL 10-45-1(10), 10-45-4, 10-45-4.1, 10-45-20, 10-46-2.1

          Example:

          John Customer purchases a subscription to a movie channel from Fantastic Cable Company. Fantastic purchases the right to view the movie channel from Hollywood Movies, a cable movie channel subscription service. The services provided by Hollywood Movies are purchased for resale as Fantastic does not use the service in any way.

          64:06:01:08.04.  Services performed on property held for sale. The repair of tangible personal property held for sale or the installment of replacement parts in tangible personal property that is held for sale are considered to be services for resale. Receipts from the sale of services for resale are not subject to sales tax if the purchaser furnishes an exemption certificate.

          Source: 18 SDR 3, effective July 14, 1991; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-45-47.1(3), 10-46-35.1(3).

          Law Implemented: SDCL 10-45-1(10), 10-45-4, 10-45-4.1, 10-45-20, 10-46-2.1

          Examples:

          (1)  Al's Used Cars, Inc., hires Ace Mechanic to install a rebuilt carburetor in one of its cars which is to be sold. Ace's fees are not subject to tax if Al gives Ace an exemption certificate.

          (2)  Al also has Ace repair a lawnmower which Al uses to mow his car lot. Ace's fees are subject to tax even though Al may eventually sell the lawnmower to a third party.

          64:06:01:09.  Conditional sales contracts -- Assigned and repossessed merchandise. If conditional sales contracts are assigned or negotiated by the retailer to a finance company, sales tax must be paid by the retailer on the full amount of the purchase price under the contract at the time the retailer makes the required tax remittance for the reporting period in which the sale was made.

          If repossession by the finance company becomes necessary, the retailer may deduct as a bad debt, as provided in SDCL 10-45-30, that portion of the tax previously paid, provided that in liquidation of the repossessed merchandise the retailer has actually suffered a loss and the gross receipts prove to be less than anticipated under the original contract price.

          If the merchandise repossessed is later sold by the retailer to a consumer, the tax applies to the second sale the same as it did to the first sale.

          Source: SL 1975, ch 16, § 1; 5 SDR 60, effective January 25, 1979; 7 SDR 80, effective February 22, 1981; 12 SDR 111, effective January 12, 1986; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 16 SDR 76, effective November 1, 1989; 21 SDR 219, effective July 1, 1995; 25 SDR 167, effective July 1, 1999; 28 SDR 178, effective July 1, 2002; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-45-47.1(2).

          Law Implemented: SDCL 10-45-1(10), 10-45-2, 10-45-30.

          64:06:01:09.01.  Sale and leaseback contracts. If a company enters into a contract to purchase equipment from another company with the intention to resell it to a third company from whom the first company will lease it back, the first transaction is presumed to be for resale if the company who purchased the equipment can show its intention. The subsequent sale and leaseback arrangement with the leasing company cannot be an afterthought or a follow-up financing mechanism. The company must demonstrate its intention, either through simultaneous or concurrent contracts or other documentation that proves their intention was not to purchase, but to resell and lease back the equipment.

          Source: 16 SDR 76, effective November 1, 1989; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-45-47.1(3), 10-46-35.1(3).

          Law Implemented: SDCL 10-45-1(10), 10-45-9.1, 10-46-2.3.

          Example:

          Company A enters into a contract with Company B to purchase a bulldozer. At the same time, Company A enters into a contract with Company C to sell the bulldozer to Company C and lease it back. At the time of purchase from Company B, no sales tax is due provided Company A furnishes Company B with an exemption certificate. The second transaction, the resale to Company C, is not a taxable transaction because the intention of Company A was always to resell the equipment to Company C. The lease payments to Company C are subject to sales or use tax.

          64:06:01:10.  Consignment sales. If retailers receive articles of tangible personal property or any product transferred electronically on consignment from others and the consigned merchandise is sold in the ordinary course of business along with other merchandise owned by the retailer, such retailers or consignees are held to be making sales at retail. Returns must be filed and the tax remitted to the state by the consignees, along with their remittance from the sale of other merchandise.

          Source: SL 1975, ch 16, § 1; 12 SDR 111, effective January 12, 1986; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1.

          Law Implemented: SDCL 10-45-2, 10-45-2.4.

          64:06:01:13.  Religious educational institutions. Gross receipts from services and sales of tangible personal property and any product transferred electronically to religious education institutions are exempt from sales tax. The exemption does not extend to purchases for the personal use of officials, members, and employees or to be used in the operation of a taxable business. Institutions operating cafes, dining rooms, or book stores or vending other merchandise must secure a sales tax license and report sales tax on their receipts from such operations.

          Qualification as a religious educational institution depends upon the following factors:

          (1)  The institution is owned, leased, operated by, or affiliated with a religious society which meets the following requirements:

               (a)  A religious society is a society which exists to worship God. The members of the religious society meet regularly to promote their religious beliefs;

               (b)  The religious society is organized for religious purposes and is nonprofit;

               (c)  The religious society is exempt under 26 U.S.C.S § 501(c) or (d) of the Internal Revenue Code in effect on January 1, 1983;

          (2)  One of the purposes of the institution is the promotion of its religious views through education; and

          (3)  The educational institution has a definite physical location with a regular faculty, classes, and established course of study.

          Source: SL 1975, ch 16, § 1; 11 SDR 1, effective July 19, 1984; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1.

          Law Implemented: SDCL 10-45-14.

          64:06:01:17.  Federal corporations, sales to. Federal land banks, federal deposit insurance corporations, commodity credit corporations, federal farm mortgage corporations, reconstruction finance corporations, American National Red Cross, and federal credit unions are exempt from sales or use tax on purchases.

          This exemption does not extend to sales to or purchases of tangible personal property or any product transferred electronically for the personal use of officials, members, or employees of such institutions or to sales to or purchases of tangible personal property used in the operation of a taxable retail business.

          Source: SL 1975, ch 16, § 1; 8 SDR 81, effective January 10, 1982; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1.

          Law Implemented: SDCL 10-45-10.

          64:06:01:19.  Fire and ambulance departments. Municipal and volunteer fire departments and volunteer ambulance departments perform governmental functions. Sales to or purchases by a municipal or volunteer fire department or a volunteer ambulance department are exempt from sales or use tax if the items purchased are for use by the fire department or volunteer ambulance department and title to the items is retained by the fire department or volunteer ambulance department.

          Fire departments or volunteer ambulance departments selling admissions to entertainment or selling tangible personal property or any product transferred electronically must pay sales tax on their receipts the same as any other person or organization engaged in such an activity.

          Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 23 SDR 118, effective January 27, 1997; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1.

          Law Implemented: SDCL 10-45-10.

          Declaratory Ruling: The sales tax exemption from receipts of sales of tangible personal property to governmental agencies also applies to the gross receipts from sales of services to governmental entities. Secretary of Revenue Declaratory Ruling No. 79-3.

          64:06:01:20.  Forms. The department shall furnish copies of the applicable forms, when  possible, to persons liable for the tax. A retailer is not excused from making a return by the fact that no form has been furnished to the retailer. A retailer not supplied with the proper form shall apply to the department for it in time to make the report and remittance within the time prescribed.

          Source: SL 1975, ch 16, § 1; 9 SDR 28, effective September 5, 1982; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 27 SDR 9, effective August 7, 2000; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-33A-16(2) 10-45-47.1(2), 10-45D-13(2), 10-46E-11(2), 10-52A-7(2), 49-31-51.1(1).

          Law Implemented: SDCL 10-33A-10.1, 10-45-27.3, 10-45D-10.2, 10-46A-8, 10-46A-1.8, 10-46E-8, 10-52A-4.2, 49-31-51.

          64:06:01:29.  Municipal tax -- Administration and reporting. Reporting of the municipal taxes administered by the department under SDCL chapters 10-52 and 10-52A shall be incorporated in state tax return forms. Only one return form must be filed to report and remit both state and municipal taxes due.

          Source: SL 1975, ch 16, § 1; 5 SDR 60, effective January 25, 1979; 9 SDR 28, effective September 5, 1982; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-52-4, 10-52A-7(2).

          Law Implemented: SDCL 10-52-4, 10-52A-4.2.

          64:06:01:30.  Municipal tax -- No special permit required. Any retailer issued a permit to engage in business in South Dakota pursuant to SDCL 10-45-25 or 10-46-22 is considered to be registered for municipal tax pursuant to SDCL 10-52-2 and 10-52A-2 that the department administers. Every retailer doing business in South Dakota and holding a state tax permit must report and remit municipal tax on taxable transactions where tangible personal property, products transferred electronically, or services are received within a municipality having an ordinance imposing a tax administered by the state pursuant to SDCL 10-52-4 or 10-52A-2.

          Source: SL 1975, ch 16, § 1; 5 SDR 60, effective January 25, 1979; 12 SDR 111, effective January 12, 1986; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-52-4, 10-52A-7(1).

          Law Implemented: SDCL 10-52-4, 10-52A-6.

          64:06:01:31.  Municipal tax -- Credit for tax previously paid. The amount of municipal tax imposed on tangible personal property, any product transferred electronically, or service shall be reduced by the amount of municipal tax previously paid by the taxpayer on the property or services because of liability to another municipality.

          Source: SL 1975, ch 16, § 1; 5 SDR 60, effective January 25, 1979; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-46-35.1(3), 10-52-4.

          Law Implemented: SDCL 10-46-6.1, 10-52-4.

          64:06:01:33.  Permit for each place of business in state. Retailers must have a tax permit for each place of business in the state except for businesses that have received a statewide permit pursuant to SDCL 10-45-25. Whether the businesses are in the same county or same town is immaterial. This provision applies to each place of business where the business is permanent, temporary, or transient.

          Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 16 SDR 76, effective November 1, 1989; 20 SDR 196, effective February 22, 1994; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(1), 10-45D-13(1), 10-46E-11(1), 10-52A-7(1).

          Law Implemented: SDCL 10-45-25, 10-45D-12, 10-46E-8, 10-52A-6.

          64:06:01:34.  Credit for tax previously paid. The amount of use tax imposed on tangible personal property, any product transferred electronically, or service shall be reduced by the amount of sales or use tax previously paid by the taxpayer on the property or service because of liability to another state or its political subdivision.

          The amount of excise tax imposed on farm machinery, attachment units, and irrigation equipment used exclusively for agricultural purposes shall be reduced by the amount of sales, use, or gross receipts tax previously paid by the taxpayer on the machinery and equipment because of liability to another state or its political subdivision.

          Credit will not be granted for taxes paid on tangible personal property, any product transferred electronically, or service in another state or its political subdivision if that state does not grant a credit for taxes paid on similar tangible personal property, any product transferred electronically, or service in this state. Credit may not be granted when property purchased in another state is shipped by a common carrier or delivered by the seller because there is no sales or use tax liability in that state.

          Source: SL 1975, ch 16, § 1; 11 SDR 1, effective July 19, 1984; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 16 SDR 76, effective November 1, 1989; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006; 33 SDR 226, effective June 27, 2007; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-46-35.1(3), 10-46E-11(3).

          Law Implemented: SDCL 10-46-6.1, 10-46E-8, 10-46E-13.

          64:06:01:35.  Required records for sales, rentals, and leases. A seller, retailer, or person storing, using, or otherwise consuming in this state tangible personal property or any product transferred electronically purchased from a retailer and the lessor and lessee of tangible personal property or any product transferred electronically for use in this state shall keep complete records showing the following:

          (1)  Gross receipts from sales or rental payments from leases of tangible personal property or any product transferred electronically, including any services that are a part of the sale or lease, made within South Dakota, whether the seller or lessor regards the receipts as taxable or nontaxable;

          (2)  All deductions allowed by law and claimed in filing returns; and

          (3)  The total purchase price of all tangible personal property or any product transferred electronically purchased for sale, consumption, or lease in South Dakota.

          These records must include the normal books of account ordinarily maintained by the average prudent business person engaged in the activity in question, together with all bills, receipts, invoices, cash register tapes, or other documents showing the original entries supporting the entries in the books of account as well as all schedules or working papers used in connection with the preparation of tax returns.

          Source: SL 1975, ch 16, § 1; 7 SDR 80, effective February 22, 1981; 11 SDR 1, effective July 19, 1984; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46E-11(4), 10-52-4, 10-52A-7(4).

          Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-39, 10-46E-8, 10-52-4, 10-52A-6.

          64:06:01:35.03.  Records to be preserved for three years -- Penalty for failure to maintain records. All records pertaining to transactions involving sales or use tax, or telecommunications access fees liability must be preserved for not less than three years. Records on depreciating assets must be maintained until that asset is fully depreciated.

          The records required for the audit must be presented to the auditor for examination on request by the secretary or authorized representatives. For purposes of this section, presentation to the auditor means physically handing over to the auditor those complete documents which are required to be kept by law and which are the subject of the audit.

          Failure to maintain and keep complete and accurate records is evidence of negligence or intent to evade the tax and may result in penalties or other administrative action.

          Source: 11 SDR 1, effective July 19, 1984; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 16 SDR 76, effective November 1, 1989; 21 SDR 219, effective July 1, 1995; 27 SDR 9, effective August 7, 2000; 28 SDR 178, effective July 1, 2002; 30 SDR 58, effective November 5, 2003; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46E-11(4), 10-52A-7(4), 10-59-38(2), 49-31-51.1(3).

          Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-2, 10-46-39, 10-46E-8, 10-52A-6, 10-59-3, 10-59-7, 10-59-16, 49-31-51.1(3).

          64:06:01:35.04.  Sample periods for audits. An auditor conducting an audit for the department may choose to do a sample audit, random or judgmental, rather than a detailed examination of all records for the audit period. The auditor shall determine the sample size based on the records available, internal controls, changes in the accounting system, and changes in business operations. If the auditor uses a judgmental block sampling method and the taxpayer does not agree to a different percentage, the auditor shall select no less than ten percent of the taxpayer's sales and use tax reporting periods to determine whether sales and use tax was properly charged. The auditor shall apply the error factor, if any, calculated from the sample to all periods of the audit.

          Source: 15 SDR 58, effective October 19, 1988; 19 SDR 42, effective September 29, 1992; 20 SDR 103, effective January 10, 1994; 21 SDR 219, effective July 1, 1995; 27 SDR 9, effective August 7, 2000; 28 SDR 178, effective July 1, 2002; 30 SDR 58, effective November 5, 2003; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(5), 10-45D-13(5), 10-46E-11(4), 10-47B-2, 10-52-4, 10-52A-7(5), 10-59-38, 49-31-51.1(4).

          Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46E-8, 10-47B-2, 10-52-4, 10-52A-6, 10-59-5, 49-31-51.1(4).

          64:06:01:35.05.  Use of other records to verify audits. For auditing purposes, the auditor may refer to other records to determine the tax liability of the taxpayer, as follows:

          (1)  When the gross sales records are inadequate, the auditor may refer to the following records:

               (a)  Federal income tax returns;

               (b)  Bank statements, including checks, deposit slips, and bank records of loans;

               (c)  Purchase invoices or journals;

               (d)  Gross profit tests based on expenses and withdrawals; and

               (e)  Cash transactions;

          (2)  When the gross taxable sales records are inadequate, the auditor may use the following methods of verifying the taxable sales:

               (a)  Using purchase invoices or journals plus an acceptable industry markup;

               (b)  Computing the ratio of gross taxable sales to gross sales from a like business and applying this ratio to gross sales;

               (c)  Using a percentage markup based on like businesses; and

               (d)  Using other indirect methods generally accepted under accounting principles; and

          (3)  Records the auditor may use to verify the deductions taken by the taxpayer include the following:

               (a)  Invoices for sale for resale;

               (b)  Invoices for exempt sales;

               (c)  Invoices for out-of-state sales;

               (d)  Freight bills showing out-of-state deliveries;

               (e)  Invoices for returns and allowances; and

               (f)  Worksheets for bad debts; and

          (4)  Records the auditor may use to verify the use tax purchases include the following;

               (a)  Purchase invoices;

               (b)  Disbursements journals or check registers; and

               (c)  Depreciation schedules.

          Source: 15 SDR 58, effective October 19, 1988; 21 SDR 219, effective July 1, 1995; 27 SDR 9, effective August 7, 2000; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(5), 10-45D-13(5), 10-46-35.1(5), 10-46E-11(4), 10-52-4, 10-52A-7(5), 49-31-51.1(4).

          Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-43, 10-46E-8, 10-52-4, 10-52A-6, 49-31-51.1(4).

          Cross-Reference: Accounting principles, § 20:37:11:08.

          64:06:01:37.  Refunds to consumers. If a retailer allows a refund or credit to a customer and the refund or credit is deductible from the retailer's gross receipts, the retailer must return to, or credit the customer with the amount of tax passed on to the customer on the amount of deductible gross receipts. Refunds on merchandise, the sales of which were included in the gross taxable receipts may be entered in the tax return as a deduction on the line provided for such purpose.

          Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1, 10-45D-13(2), 10-46E-11(2), 10-52-4, 10-52A-7(2).

          Law Implemented: SDCL 10-45-29, 10-45D-12, 10-46E-8, 10-52-4, 10-52A-6.

          64:06:01:39.  Return of tax reports and telecommunications access fees. After a tax permit is issued, tax and telecommunications access fee blanks on which the retailer is to report and remit tax, municipal tax, gross receipts tax on visitor-related businesses, and telecommunications access fees to the department shall be sent to the retailer each reporting period. Failure to receive a sales and use tax return or telecommunication access fee return does not excuse failure to report or pay tax on time. All remittances must be made payable to the state treasurer. Any retailer that reports and remits taxes by electronic transmission pursuant to SDCL 10-59-32 will not be sent a return.

          A tax or telecommunications access fee return is made to the department when a completed state and municipal sales and use tax return or telecommunications access fee form is received at the office of the department in Pierre or at a field office of the department. A remittance is made to the department when an order on a bank or other remitter to pay a stated amount to the named payee, which is not thereafter dishonored, is received at the office of the department in Pierre or at a field office of the department. If a return or remittance is mailed with sufficient postage, the date of receipt is the date of the United States postal service postmark. If there is no postmark, the postmark date is illegible, the postmark is not that of the United States postal service, or the return or remittance is not mailed by either certified or registered mail, the return or remittance is made on the date the return is received at the office of the department in Pierre or at a field office of the department.

          Source: SL 1975, ch 16, § 1; 5 SDR 60, effective January 25, 1979; 7 SDR 80, effective February 22, 1981; 9 SDR 28, effective September 5, 1982; 11 SDR 1, effective July 19, 1984; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 27 SDR 9, effective August 7, 2000; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-45-47.1(2), 10-45D-13(2), 10-46E-11(2), 10-52-4, 10-52A-7(2), 49-31-51.1(1).

          Law Implemented: SDCL 10-45-27.3, 10-45D-10.2, 10-45D-12, 10-46E-8, 10-52-4, 10-52A-4.2, 10-52A-6, 49-31-51.1(1).

          64:06:01:39.01.  Rate schedules. Retailers may compute the tax imposed by SDCL chapters 10-45, 10-45D, 10-52, 10-52A, and 10-46E according to the following schedules. Retailers may request the rate schedules from the department.

          Source: 15 SDR 58, effective October 19, 1988; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 29 SDR 177, effective July 2, 2003; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-23, 10-45D-13(2), 10-46E-11(3), 10-52-4, 10-52A-7(2).

          Law Implemented: SDCL 10-45-2, 10-45-22, 10-45-23, 10-45D-12, 10-46E-8, 10-52-2, 10-52A-6, 10-45-1.4.

          64:06:01:39.02.  Monthly filing. Taxpayers required to file monthly, as set forth in SDCL 10-46E-8, 10-45-27.3, and 10-52A-4.2, shall remain on the monthly filing system for a minimum period of two years.

          Taxpayers with bimonthly taxes of more than $166.66 and taxpayers with monthly taxes of more than $83.33 must file monthly.

          Source: 17 SDR 4, effective July 18, 1990; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006; 33 SDR 226, effective June 27, 2007; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1(2), 10-45D-13(2), 10-46E-11(2), 10-52A-7(2).

          Law Implemented: SDCL 10-45D-12, 10-45-27.3, 10-46E-8, 10-52A-4.2.

          64:06:01:39.03.  Return and remittance -- Streamline volunteer registrations. Any seller that is registered under the Streamline agreement, which does not have a legal requirement to register in the member state, and is not a Model 1, 2, or 3 seller as defined below, shall submit its sales and use tax returns as follows:

          (1)  Upon registration, a member state shall provide to the seller the returns required by that state; and

          (2)  The seller must file a return each month unless the state allows less frequent filing.

          A Model 1 seller is a seller that has selected a certified service provider, as defined in SDCL subdivision 10-45C-1(c), as its agent to perform all of the seller's sales and use tax functions, other than the seller's obligation to remit tax on its own purchases.

          A Model 2 seller is a seller that has selected a certified automated system, as defined in SDCL subdivision 10-45C-1(c), to perform part of its sales and use tax functions, but retains responsibility for remitting tax.

          A Model 3 seller is a seller that has sales in at least five member states, has total annual sales revenues of at least five hundred million dollars, has a proprietary system that calculates the amount of tax due in each jurisdiction, and has entered into a performance agreement with the member states that establishes a tax performance standard for the seller. As used in this definition, a seller includes an affiliated group of sellers using the same proprietary system.

          Source: 31 SDR 214, effective July 6, 2005; 32 SDR 225, effective July 3, 2006; 33 SDR 226, effective June 27, 2007; 38 SDR 214, effective June 21, 2012.

          General Authority: SDCL 10-45-47.1(2).

          Law Implemented: SDCL 10-45-27.3.

          64:06:01:40.  Preparation of return. The tax return is a combination sales and use tax report. Sales are reported under gross receipts, and withdrawals from stock or purchases for own use or contract use are reported at cost as a use tax item. Deductible receipts are listed on the tax return; and if other deductions are claimed, the deductions may be listed provided an explanation is attached.

          Source: SL 1975, ch 16, § 1; 7 SDR 80, effective February 22, 1981; 9 SDR 28, effective September 5, 1982; 11 SDR 1, effective July 19, 1984; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-45-47.1(2), 10-45D-13(2), 10-46-35.1, 10-46E-11(2), 10-52A-7(2).

          Law Implemented: SDCL 10-45-27.3, 10-45D-10.2, 10-46-39, 10-46E-8, 10-52A-4.2.

          64:06:01:41.  Returned merchandise. If a retailer sells tangible personal property or any product transferred electronically and the goods are returned by the customer, the transaction is handled as follows: (1)  If the retailer has included in gross sales the total selling price of the property and has remitted sales tax to the department, the retailer may claim a credit as returned goods for the amount of the sale on a subsequent sales and use tax return if sales tax was returned to the purchaser at the time the goods were returned; and (2)  If a retailer makes a time sale and has included in the gross receipts only the amount of each payment actually received from the time sale, the retailer may claim a credit as returned goods on a subsequent sales and use tax return the amount of the sale reported on prior sales and use tax returns if the retailer has returned to the customer the tax which the retailer collected on payments previously received from the customer.

          Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1(2), 10-45D-13(3), 10-46E-11(3), 10-52A-7(3).

          Law Implemented: SDCL 10-45-29, 10-45D-12, 10-46E-8, 10-52A-6.

          64:06:01:43.  Sales by loan or finance companies. Companies who repossess or acquire tangible personal property or any product transferred electronically in connection with their loan or finance business and who sell such property at retail are required to pay sales tax on the receipts.

          Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-47.1(3).

          Law Implemented: SDCL 10-45-2, 10-45.2.4.

          64:06:01:44.  Sale of business permit not transferable. When the holder of a tax permit sells the business to another person, all tax for which the holder is liable becomes due immediately. The holder of the tax permit shall immediately notify the department and surrender the permit for cancellation and shall, within 15 days, make a final tax return and remit all tax due. The purchaser of the business shall apply for a new permit in the purchaser's own name.

          Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 30 SDR 58, effective November 5, 2003; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(1), 10-45D-13(1), 10-46E-11(2), 10-52A-7(1).

          Law Implemented: SDCL 10-45-24, 10-45D-12, 10-46E-8, 10-52A-6.

          64:06:01:54.  Temporary tax permits. Temporary tax permits may be issued by the department to businesses of a transitory or seasonal nature or to transient solicitors for not more than 45 days.

          Source: 2 SDR 40, effective December 8, 1975; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 16 SDR 76, effective November 1, 1989; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(1), 10-45D-13(1), 10-46E-11(1), 10-52A-7(1).

          Law Implemented: SDCL 10-45-24, 10-45D-12, 10-46E-8, 10-52A-6.

          64:06:01:55.  Temporary tax permit -- Application. Application for a temporary tax permit must be made to the department. An applicant is required to supply financial records and other relevant information required by the secretary to support that application. Any applicant may also be required to post a bond before a permit will be issued under conditions similar to § 64:06:01:02.

          Source: 2 SDR 40, effective December 8, 1975; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 30 SDR 58, effective November 5, 2003; 32 SDR 225, effective July 3, 2006.

          General Authority: SDCL 10-45-47.1(1), 10-45D-13(1), 10-46E-11(1), 10-52A-7(1).

          Law Implemented: SDCL 10-45-24, 10-45D-12, 10-46E-8, 10-52A-6.

          64:06:01:58.  Reimbursement for expenditures. Reimbursement for expenditures actually made are not gross receipts when the reimbursement occurs within a relationship where the ownership of the property or service purchased by the person receiving the reimbursement passed directly and immediately upon the purchase to the person who made the reimbursement and the person who made the reimbursement was legally liable for payment for the property or services to the person who sold the property or services.

          The reimbursement must be separately stated in the taxpayer's books, records, and billings for auditing purposes.

          Source: 9 SDR 28, effective July 1, 1983; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-45-47.1(3).

          Law Implemented: SDCL 10-45-1(10), 10-45-1.14.

          Examples:

          (1)  An architect is hired to do a study on the feasibility of renovating a building in another city. In order to make the study the architect purchases a ticket in the architect's own name and flies to the city in which the building is located. In the bill the customer is charged for the cost of the flight. The amount received from the customer is includable in the architect's gross receipts because the customer is not legally liable to pay the airline for the flight.

          (2)  A court reporter is hired to take a deposition in another city. In order to take the deposition, the court reporter purchases an airline ticket and flies to that city. In the bill, the client is charged for the cost of the airline ticket. The amount received from the client for the flight is includable in the court reporter's gross receipts because the client was not legally liable to the airline for the cost of the ticket.

          (3)  A seller of real property obtains the abstract for the parcel of land from the abstracter in preparation of a title search. A new deed is subsequently prepared and returned with the abstract to the abstracter. The abstracter updates the abstract and then files the deed in the register of deeds' office. The abstracter pays the filing fees. In the abstracter's bill to the client, the abstracter separately lists the register of deeds' filing fees. Receipt of payment for the filing fees are not includable in the abstracter's gross receipts because the client is legally obligated to pay the fee to the register of deeds' office.

          (4)  A client hires a real estate broker to sell the client's house. The broker obtains the abstract on the property. In reviewing the abstract, the broker finds the real estate taxes for the previous year have not been paid. The broker then pays the taxes to clear the title. After a buyer is found, the broker prepares a deed and files it in the register of deeds' office. In the bill to the client, the broker separately lists the amount due for payment of the taxes and for the filing fees paid to the register of deeds' office. Payment for the taxes and the filing fees are not includable in the broker's gross receipts because the client is legally obligated to pay the taxes and the filing fees.

          64:06:01:60.  Gross receipts tax on visitor-related businesses -- No special permit required. Any retailer issued a permit to engage in business in South Dakota is considered to be registered for the gross receipts tax on visitor-related businesses pursuant to SDCL chapter 10-45D. Each retailer doing business in South Dakota and holding a state tax permit must report and remit the gross receipts tax on visitor-related businesses on taxable transactions where tangible personal property, any product transferred electronically, or services are received in the state.

          Source: 28 SDR 178, effective July 1, 2002; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45D-13(1), 10-52A-7(1).

          Law Implemented: SDCL 10-45D-12, 10-52A-6.

          64:06:01:61.  Application of sourcing rules. The sourcing rules in §§ 64:06:01:62 to 64:06:01:68, inclusive, apply regardless of the characterization of a product as tangible personal property, a product transferred electronically, or a service. The sourcing rules in §§ 64:06:01:62 to 64:06:01:68, inclusive, are used to determine a seller's obligation to collect and remit a sales or use tax with respect to the seller's retail sale of a product. These provisions do not apply to the obligation of a purchaser or lessee to pay tax on the use of a product. The sourcing rules in §§ 64:06:01:62 to 64:06:01:68, inclusive, do not apply to sales or use taxes on:

          (1)  The retail sale or transfer of watercraft, modular homes, manufactured homes, and mobile homes;

          (2)  The retail sale, excluding lease or rental, of motor vehicles, trailers, semitrailers, or aircraft that do not qualify as transportation equipment in § 64:06:01:68; and

          (3)  Telecommunication services. Telecommunication services are sourced according to §§  64:06:02:90 to 64:06:02:92, inclusive.

          Source: 29 SDR 177, effective July 2, 2003; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-108.

          Law Implemented: SDCL 10-45-108.

          64:06:01:63.  General sourcing rules. The retail sale, excluding lease or rental, of a product shall be sourced as follows:

          (1)  If the product is received by the purchaser at a business location of the seller, the sale is sourced to that business location;

          (2)  If subdivision (1) does not apply, the sale is sourced to the location where received by the purchaser, or the purchaser's donee, if known by the seller;

          (3)  If subdivision (1) or (2) does not apply, the sale is sourced to the address for the purchaser in the business records of the seller that are maintained in the ordinary course of the seller's business, provided that the use of this address does not constitute bad faith;

          (4)  If subdivision (1), (2), or (3) does not apply, the sale is sourced to the location indicated by an address for the purchaser obtained during the consummation of the sale, including the address of a purchaser's payment instrument, if no other address is available, provided that use of this address does not constitute bad faith; and

          (5)  If subdivision (1), (2), (3), or (4) does not apply, or the seller is without sufficient information to apply any of the subdivisions, then the sale is sourced to the address (disregarding any location that merely provided the electronic transfer of the product sold) from which:

               (a)  Tangible personal property was shipped;

               (b)  The product transferred electronically was first available for transmission by the seller; or

               (c)  The service was provided.

          Source: 29 SDR 177, effective July 2, 2003; 35 SDR 48, effective September 8, 2008.

          General Authority: SDCL 10-45-108.

          Law Implemented: SDCL 10-45-108.

          64:06:01:67.  Sourcing rules for services and digital products concurrently used in multiple states. Repealed.

          Source: 29 SDR 177, effective July 2, 2003; 32 SDR 225, effective July 3, 2006; repealed, 33 SDR 226, effective June 27, 2007.

          64:06:01:68.  Sourcing rules for direct mailing. Notwithstanding § 64:06:01:63, a purchaser of direct mail that is not a holder of a direct pay permit may provide to the seller in conjunction with the purchase an exemption certificate claiming direct mail.

          Upon receipt of an exemption certificate claiming direct mail, the seller is relieved of all obligations to collect, pay, or remit the applicable tax and the purchaser is obligated to pay or remit the applicable tax on a direct pay basis. An exemption certificate claiming direct mail shall remain in effect for all future sales of direct mail by the seller to the purchaser until it is revoked in writing. A purchaser of direct mail that provides the seller with documentation of direct pay permit is not required to provide an exemption certificate claiming direct mail.

          If the purchaser of direct mail does not provide the seller with documentation of a direct pay permit or an exemption certificate claiming direct mail, the transaction shall be sourced as either:

          (1)  Advertising and promotional direct mail. The purchaser may provide information to show each jurisdiction to which the advertising and promotional direct mail shall be delivered to the recipients. Upon receipt of the delivery information, the seller shall collect the tax according to the delivery information provided by the purchaser. In the absence of the intent to evade tax, the seller is relieved of any further obligation to collect tax on any transaction where the seller has collected tax pursuant to the delivery information provided by the purchaser. If the purchaser of advertising and promotional direct mail does not provide the seller with delivery information, the seller shall collect the tax according to subdivision 64:06:01:63(5); or

          (2)  Other direct mail. The seller shall collect the tax according to subdivision 64:06:01:63(3) which is sourced to the address for the purchaser in the business records of the seller.

          Nothing in this rule limits a purchaser's obligation for sales or use tax to any state to which the direct mail is delivered. The purchaser shall source the sale to the jurisdictions to which the direct mail is delivered to the recipients and must report any sales or use tax due.

          Source: 29 SDR 177, effective July 2, 2003; 31 SDR 214, effective July 6, 2005; 37 SDR 48, effective September 21, 2010.

          General Authority: SDCL 10-45-108.

          Law Implemented: SDCL 10-45-94.1, 10-45-108.

          64:06:01:68.01.  Definition of terms used in direct mail sourcing rule. Terms used in § 64:06:01:68 mean:

          (1)  "Advertising and promotional direct mail," any direct mail as defined in SDCL 10-45-94.1 if the primary purpose of the direct mail is to attract public attention to a product, person, business, or organization, or to attempt to sell, popularize, or secure financial support for a product, person, business, or organization. As used in this section, the term, product, means any tangible personal property, product transferred electronically, or service;

          (2)  "Other direct mail," any direct mail as defined in SDCL 10-45-94.1 that is not advertising and promotional direct mail regardless of whether advertising and promotional direct mail is included in the same mailing. Other direct mail includes a transactional direct mail that contains personal information specific to the addressee, any legally required mailings, and other non-promotional direct mail delivered to existing or former shareholders, customers, employees, or agents.

          Other direct mail does not include the development of billing information or the provision of any data processing service that is more than incidental.

          Source: 37 SDR 48, effective September 21, 2010.

          General Authority: SDCL 10-45-108.

          Law Implemented: SDCL 10-45-94.1, 10-45-108.

          64:06:01:69.  Direct mail. Repealed.

          Source: 29 SDR 177, effective July 2, 2003; repealed, SL 2010, ch 59, § 5, effective July 1, 2010.

          General Authority: SDCL 10-45-47.1(3).

          Law Implemented: SDCL 10-45-108.

          64:06:01:70.  Delivery charges. If a shipment includes exempt property and taxable property, the seller must allocate the delivery charge by using:

          (1)  A percentage based on the total sales price of the taxable property compared to the total sales price of all property in the shipment; or

          (2)  A percentage based on the total weight of the taxable property compared to the total weight of all property in the shipment.

          The seller must tax the percentage of the delivery charge allocated to the taxable property but does not have to tax the percentage allocated to the exempt property.

          Source: 30 SDR 211, effective July 1, 2004; 33 SDR 226, effective June 27, 2007.

          General Authority: SDCL 10-45-47.1(3).

          Law Implemented: SDCL 10-45-1(4).

          64:06:01:71.  Sourcing rules for computer software maintenance contracts. The sales of computer software maintenance contracts shall be sourced to each level of a taxing jurisdiction as follows:

          (1)  The retail sale of a computer software maintenance contract sold by the seller with the sale of the software shall be sourced to the same address as the retail sale of the software;

          (2)  The retail sale of a computer software maintenance contract sold after the retail sale of the software, the renewal of a computer software maintenance contract, or the retail sale of a computer software maintenance contract by a seller other than the seller of the software shall be treated separately from the retail sale of the software and shall be sourced in accordance with § 64:06:01:63. If subdivisions 64:06:01:63(1) and (2) do not apply to the retail sale of a renewal of a computer software maintenance contract, the seller may source a retail sale of a renewal of a computer software maintenance contract to the address where the purchase of the software was sourced.

          Source: 37 SDR 48, effective September 21, 2010.

          General Authority: SDCL 10-45-108.

          Law Implemented: SDCL 10-45-108.

          64:06:01:72.  Sourcing software term license and subscriptions. A payment made in connection with a software term license or software subscription shall be sourced in accordance with § 64:06:01:63. However, if the seller sourced the initial payment under subdivision 64:06:01:63(2), the following rules apply to each subsequent payment:

          (1)  If the seller receives information from the purchaser indicating that the location of the software has changed, a subsequent payment made in connection with a software term license or renewal of a software subscription shall be sourced to the new location; or

          (2)  If the seller has not received information from the purchaser indicating a change in the location of the software, the seller may source a subsequent license payment made in connection with a software term license or the renewal of a software subscription to the same location where the initial payment was sourced.

          Source: 37 SDR 48, effective September 21, 2010.

          General Authority: SDCL 10-45-108.

          Law Implemented: SDCL 10-45-108.

          64:06:01:73.  Definition of terms. Terms used in §§ 64:06:01:71 and 64:06:01:72, inclusive, mean:

          (1)  "Computer software maintenance contract," a contract that obligates a vendor of computer software to provide a customer with future updates or upgrades to either computer software or support services with respect to computer software, or both;

          (2)  "Software subscription," a transaction requiring additional payments for updates to prewritten computer software;

          (3)  "Software term license," a transaction where the purchaser's right to continue to use prewritten software is dependent on periodic payment.

          Source: 37 SDR 48, effective September 21, 2010.

          General Authority: SDCL 10-45-108.

          Law Implemented: SDCL 10-45-108.

          64:06:01:74.  Sourcing rules of personal care services. The sale of any personal care service shall be sourced at the location where the service is performed, which is the same location where the service is received by the purchaser. The service is received by the purchaser either at the seller's location according to subdivision 64:06:01:63(1) or the purchaser's location according to subdivision 64:06:01:63(2). For the purpose of this rule the term, personal care services, means any service performed on the physical human body. However, any funeral service or personal care service that is available at multiple locations pursuant to a single payment is exempt from the provisions of this section.

          Source: 38 SDR 214, effective June 21, 2012

          General Authority: SDCL 10-45-108.

          Law Implemented: SDCL 10-45-108.

          Example:

          AZ, a customer in South Dakota, contacts a massage therapist located outside South Dakota for a therapeutic massage. AZ requests that the therapist perform the massage at her residence in South Dakota. The therapist travels to AZ's residence to perform the massage. AZ receives, or makes first use of, the service in South Dakota where the massage is performed; therefore the sale is sourced to South Dakota.