Payroll Without State Income Tax Withholding
South Dakota employers do not withhold state income tax, and there is no state withholding certificate for employees to complete. Payroll is simpler than in most states, but it is not automatic. Employers still register with the Department of Labor and Regulation, pay reemployment assistance tax, report new hires, follow the state minimum wage and handle every federal payroll tax and form. BOMCAS runs payroll for South Dakota employers and files the state and federal reports on time.
Registering as a South Dakota Employer
A business that hires in South Dakota sets up a reemployment assistance account with the Department of Labor and Regulation. Reemployment assistance is South Dakota's name for unemployment insurance. The employer also needs a federal employer identification number and federal deposit schedule.
Every newly hired or rehired employee must be reported to the South Dakota New Hire Reporting Center within 20 days of their first day of work for pay. This applies to full-time, part-time, temporary, seasonal and student workers and to family members on the payroll. The report includes the employee's name, address, Social Security number and hire date, and the employer's name, address and federal ID number.
Reemployment Assistance Tax
Reemployment assistance tax is paid by the employer only. Nothing is withheld from the employee for it. For 2026, the tax applies to the first $15,000 of each employee's wages for the year.
- New non-construction employers: 1.20 percent plus a 0.55 percent investment fee in the first year, and 1.00 percent plus 0.55 percent in years two and three if the account balance is positive.
- New construction employers: 6.00 percent plus 0.55 percent in the first year, and 3.00 percent plus 0.55 percent in years two and three if the account balance is positive.
- Experienced employers: after three years, a rate assigned each year from the employer's reserve ratio, with an administrative fee of 0.08 percent for experience-rated employers from 2026.
Quarterly wage reports are due April 30, July 31, October 31 and January 31. All wages paid are reported, including wages above the $15,000 base. We check the annual rate notice, apply it in payroll and file each report.
South Dakota Minimum Wage
The state minimum wage is $11.85 an hour for 2026, and $5.925 an hour cash wage for tipped employees, as long as wages plus tips reach the full minimum. The rate is adjusted each year for inflation and cannot go down. It rises to $12.30 an hour, and $6.15 for tipped employees, on January 1, 2027. The higher of the federal and state rates applies. Limited exemptions exist, including some seasonal amusement and recreation businesses. We update rates in payroll before the first pay period of the year and flag any employee who falls below the minimum.
Federal Payroll Taxes and Forms
- Federal income tax withholding based on each employee's Form W-4.
- Social Security tax of 6.2 percent each for employer and employee on wages up to $184,500 in 2026, and Medicare tax of 1.45 percent each on all wages, plus 0.9 percent additional Medicare tax withheld from wages over $200,000.
- Federal unemployment tax (FUTA) of 6.0 percent on the first $7,000 of wages, reduced by a credit of up to 5.4 percent for state unemployment tax paid.
- Deposits on the federal schedule, quarterly Form 941, annual Form 940, and Forms W-2 and W-3 by January 31.
Tips and Overtime Reporting
New federal deductions for qualified tips and overtime, available from 2025 through 2028, come with employer reporting duties. Employers must report certain cash tips and the tipped worker's occupation, and qualified overtime compensation, on information returns. Restaurants, bars, casinos in Deadwood and hospitality businesses in tourist areas should make sure their payroll records separate tips and the overtime premium from regular pay.
Employees Who Work Across State Lines
A South Dakota employer with staff who work in Minnesota, Iowa, North Dakota, Nebraska or Montana, or remote employees living in those states, may need to register and withhold income tax there and pay unemployment tax to that state. We review where each employee works and set up the right state accounts.
Seasonal and Harvest Hiring
Tourism in the Black Hills and harvest on farms and ranches bring short bursts of hiring. Each seasonal worker still needs a new-hire report, correct withholding and inclusion in the quarterly wage report. Agricultural labour has its own federal rules, and we check whether farm employees fall under Form 943 instead of Form 941.
What You Get Each Pay Period
We calculate pay, withholdings and employer taxes, prepare direct deposit and pay stubs, make tax deposits, and keep a payroll register that ties to the general ledger. At year end we prepare W-2s and reconcile them to the quarterly reports.
South Dakota Payroll Questions
Do South Dakota employers withhold state income tax?
No. South Dakota has no individual income tax, so there is no state income tax withholding. Federal income tax, Social Security and Medicare withholding still apply.
What is the South Dakota unemployment tax rate for a new employer?
In 2026, a new non-construction employer pays 1.20 percent plus a 0.55 percent investment fee on the first $15,000 of each employee's wages. New construction employers pay 6.00 percent plus 0.55 percent.
How soon must I report a new hire in South Dakota?
Within 20 days of the employee's first day of work for pay, to the South Dakota New Hire Reporting Center. This includes part-time, seasonal and family employees.
What is the South Dakota minimum wage?
$11.85 an hour in 2026, or a $5.925 cash wage for tipped employees if tips bring them to the minimum. It increases to $12.30 an hour on January 1, 2027.
Talk to BOMCAS About Payroll in South Dakota
Payroll posts to the general ledger, so most payroll clients also use our bookkeeping, and wage and payroll tax totals flow into the business return. Owners weighing salary against distributions should talk to us about tax planning. Employers with missed payroll filings can start with back taxes and late filing, owners and staff can have their personal returns prepared here, and businesses hiring Canadians should read about cross-border tax. Employers who sell taxable goods or services also need their sales and use tax in order. For a summary of how South Dakota taxes businesses and residents, see the South Dakota accounting and tax overview or our United States services.
Tell us what you need help with and we will reply with next steps. Contact BOMCAS, use the contact form below, call 780-667-5250 or email info@bomcas.ca. You can also go back to the South Dakota overview. This page is general information, not advice for a particular situation.