Effective July 1, 2020, charges for internet access are no longer subject to South Dakota state and municipal sales tax. This change correlates with legislation enacted in 2016 that permanently extended the Internet Tax Freedom Act. The legislation established an end date of June 30, 2020 for seven states that imposed a tax on internet access at the time.
Internet access charges are often bundled with other services such as voice or video service. If an internet service provider can identify the charges related to internet access (through invoices, books or records kept in the regular course of business), the internet access charges remain exempt. Otherwise, the bundled charges are taxable. The change applies to sales and use tax as well as Wireless Gross Receipts tax for charges inkling access charges, live chat or conferencing fees, prepaid internet, internet activation, disconnection, early termination and reconnection fees, service upgrade fees and data fees. However, it does not change the taxability of equipment and related charges or telecommunication fees. (Internet Tax Freedom Act: Internet Access Taxation, December 2019, South Dakota Department of Revenue)