South Dakota Department of Revenue Updates Sales Tax Guidelines for Attorney Services

In July 2023, the South Dakota Department of Revenue initially published a Tax Fact bulletin specific to attorney services and the applicability of sales and use tax.

Topics Covered in the Facts Sheet: The facts sheet covers various aspects related to the taxation of attorney services, including:

• Barter arrangements
• Retainers and trusts
• Reimbursable expenses
• Resale purchases
• Use tax
• Court reporters
• Expert consulting and testimony
• Tax rates

New State Sales and Use Tax Rate: The updated information includes a newly updated state sales and use tax rate of 4.2%, which is down from 4.5% effective July 1, 2023. This rate applies to all sales or purchases of taxable products and services, including attorney services, within South Dakota.

For taxpayers, this update has several implications:

• Clarity on Tax Obligations: Taxpayers, particularly attorneys and law firms, gain clarity on how sales and use tax applies to their services and related transactions. The facts sheet provides guidance on various scenarios and aspects of taxation, helping taxpayers understand their obligations.
• Awareness of Tax Rate Changes: Taxpayers need to be aware of changes in tax rates to ensure compliance with state tax laws. The updated 4.2% state sales and use tax rate is applicable to all taxable products and services, including attorney services. Municipal sales tax rates range from 1% to 2% in addition to the state rate. Taxpayers should ensure that they apply the correct tax rate to their transactions to avoid underpayment or overpayment of taxes.

This update from the South Dakota Department of Revenue aims to provide taxpayers with clear guidance on the taxation of attorney services and related matters, including changes in tax rates, to facilitate compliance with state tax laws. The published versions updates is the October 2023 Tax Facts on Attorneys and can be found on the South Dakota Department of Revenue website. For more information, see the Tax Fact sheet here: https://dor.sd.gov/media/03zn1eje/attorneys.pdf.

(South Dakota DOR Website, https://dor.sd.gov/, July 1, 2023)