Madison Sales and Use Tax

Madison's Rates and What Makes Them Different

Madison's sales tax looks like most South Dakota cities at first glance, with a 2 percent city tax and a 1 percent gross receipts tax. The difference is in what the gross receipts tax covers. According to the Department of Revenue's municipal chart, Madison applies it to lodging, eating establishments and alcohol, but not to admissions. With Lake County declining the new county tax, the only scheduled change is the state increase in July 2027. BOMCAS prepares Madison sales tax returns remotely.

Licensing and the list of taxable services are on the statewide sales and use tax page. Madison's codes, its admissions exception and lake rentals are explained here.

Current Rates

General sales and taxable services: 6.2 percent (4.2 state plus 2 percent city, code 221-2).
Lodging, restaurant food and alcohol: 7.2 percent, adding the 1 percent gross receipts tax (code 221-1).
Admissions to events and attractions: 6.2 percent, without the gross receipts tax.
Lodging under 28 days: the 1.5 percent tourism tax in addition.
From July 1, 2027: the state rate is scheduled to rise to 4.5 percent, so the general rate becomes 6.5 percent.

Lake Cabins and Short-Term Rentals

Cabins and homes on Lake Madison and Lake Herman rented for stays under 28 days are lodging. Owners must hold a sales tax licence and charge state tax, the tourism tax and, inside city limits, the city's 2 percent and 1 percent taxes. Many lake properties are outside city limits, where only state tax and the tourism tax apply. Bookings through an online marketplace are generally taxed by the platform; direct bookings are the owner's responsibility.

Technology Services

South Dakota taxes most services, and many technology services are taxable, including software, computer services, data processing and IT support for South Dakota customers. Cybersecurity and IT consultants in Madison should check which services are taxable and collect tax on those delivered to South Dakota customers. Services delivered to customers in other states are generally sourced there and may be taxable in that state if the business is required to register.

Manufacturers and Suppliers

Parts and materials that become part of a manufactured product can be bought for resale with an exemption certificate. Equipment, tools and supplies used in production are generally taxable, and use tax is owed when vendors do not charge South Dakota tax.

Restaurants, Bars and Marinas

Restaurants and bars charge 7.2 percent on food and alcohol in the city. Marinas renting boats, docks or equipment collect tax on those rentals, and bait and tackle sales are taxable retail sales.

Events and Admissions

Events such as concerts and sports charge state and city sales tax on admissions, but not Madison's gross receipts tax. Vendors at summer events need a licence and charge the location's rate.

Filing

We prepare returns, reconcile them to sales reports, track exemption certificates and update rates for the July 2027 change.

Use Tax

Equipment, software and supplies bought online or out of state without South Dakota tax are subject to use tax at the Madison rate when used here. Technology firms buying hardware and software subscriptions should review invoices for tax charged.

Exemption Certificates

Sales to DSU, the school district, churches, exempt nonprofits and resellers need valid certificates on file.

Online Sellers

Madison businesses selling online charge the rate for each delivery address. Sales into other states may require registration there once they pass that state's threshold, while marketplace sales are generally handled by the platform.

Farm Purchases

Seed and fertiliser for agricultural use are exempt, and farm machinery, attachments and irrigation equipment used exclusively in agriculture pay the separate farm machinery excise tax, currently 4.2 percent and 4.5 percent from July 1, 2027, instead of sales tax. Farm supply dealers in Madison should keep the right exemption documentation from customers.