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Effective July 1, 2005, the State of South Dakota has amended Section 10-45-30 of its tax law to read that a bad debt means the same as the term is defined in the Internal Revenue Code. According to the bill, for sales tax purposes, when computing the amount of tax due, a seller may deduct bad debts from the total amount upon which the tax is calculated for any return. Furthermore, a taxpayer who is not required to file Federal income tax returns may also take a bad debt deduction. The bill states that a seller may allocate its bad debts among states if the books and records of the seller claiming the bad debt can support such allocation. (State of South Dakota, H.B. 1037, effective July 1, 2005)


The South Dakota House of Representatives has recently passed House Bills 1033 and 1044 for review by the South Dakota Senate. House Bill 1033 would enact an amnesty that would relieve a seller of liabilities associated with uncollected or unpaid sales or use tax, penalty, or interest if the seller registers in accordance with the Streamlined Sales and Use Tax Agreement. House Bill 1044 discusses the refund procedures for over-collected sales or use taxes. If enacted, Chapter 10-59 would read as follows: No purchaser has a cause of action against a seller for over-collected sales or use taxes until the purchaser has provided written notice to a seller requesting a refund of over-collected sales or use taxes and the seller has had sixty days to respond. The notice to the seller shall contain the information necessary to determine the validity of the request. (H.B. 1033 and H.B. 1044, South Dakota House of Representatives, passed by House, January 20, 2005)


In South Dakota, a store that sells gasoline, grocery items, and cigarettes received promotional allowances from manufacturers, distributors, and wholesalers. These allowances were not subject to tax as long as they were received in conjunction with a contract that required the store to display the product or signage of the manufacturer, distributor, or wholesaler is a certain place and specified manner. (Declaratory Ruling Rev 04-04, Department of Revenue and Regulation, February 4, 2004)


The South Dakota Department of Revenue and Regulation stated that moving services are exempt from sales tax as of July 1, 2004, and that packing, unpacking, loading, unloading, and storage are also exempt if performed as part of the transportation service. However, packing, unpacking loading, unloading, and storage are taxable if performed separately from the transportation service. In addition, state and municipal sales taxes apply to containers purchased by moving companies in South Dakota, and use taxes apply to containers and services consumed or used in South Dakota by moving businesses if no sales tax was paid at the time of purchase. (Tax Facts #240, July 2004)


Effective July 1, 2004 used and new manufactured homes built to Housing and Urban Development (HUD) standards, and placed on a temporary foundation, must be titled and are subject to a 3% initial registration fee if the homes are to be moved to a temporary foundation. If a home was previously on a permanent foundation and moved to a temporary foundation, it must be titled and is subject to the 3% fee. Dealers may purchase HUD homes and materials and services used to construct manufactured homes exempt from tax because they are for resale. Dealers who sell and install manufactured homes to be installed on a permanent foundation in a different city are responsible for the 4% state use tax and any applicable contractors’ excise tax and municipal taxes. In addition, dealers who sell manufactured homes to be installed outside the state are responsible for the 4% state sales tax and applicable local use taxes, but not contractors’ excise taxes, unless the dealer does not have the contract to install the home on its permanent foundation, in which case the dealer is not considered the prime contractor. For homes sold to be on a permanent foundation where installation is not included the taxable base would be the cost of the raw materials and the state and municipal sales tax would apply. Delivery charges are included in the sale price of the home. Display models are considered to be still in inventory and are not subject to sales or use tax or the 3% initial registration fee if the manufactured home is only being used for display purposes. For more information, taxpayers can call the Business Tax Division at 800-829-9188. (Tax Facts #221, July 2004)



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