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.