Where Rapid City and Canada Meet
From our Edmonton office we handle tax in both countries, and Rapid City has more Canadian connections than its distance from the border suggests. Some Canadians marry into military families at Ellsworth Air Force Base, others take health care jobs in the city, study engineering at the South Dakota School of Mines and Technology, buy cabins in the Black Hills or come south to sell at summer events such as the Sturgis rally. Each of these brings filings in both countries. Doing both returns in one place keeps the foreign tax credits and treaty claims consistent.
Residency, treaty and reporting rules for Canadians anywhere in the state are in South Dakota cross-border tax; this page looks at the Canadians we meet in and around Rapid City.
Canadian Spouses of Ellsworth Airmen
A Canadian married to a U.S. service member stationed at Ellsworth often arrives without a green card and with Canadian bank accounts, an RRSP and perhaps a home still in Canada. If the spouse is a nonresident alien, the couple can choose to file a joint U.S. return by electing to treat the spouse as a U.S. resident, which usually lowers the household's tax but brings the spouse's worldwide income into the U.S. return. The spouse will need a Social Security number or an ITIN. On the Canadian side, the spouse usually becomes a non-resident on leaving, which can bring a departure return and a deemed disposition of some property. If the Canadian accounts add up to over $10,000 at any point in a year, the couple also owes an FBAR, filed on FinCEN Form 114.
Canadian Health Care Workers
Rapid City is the medical centre for a wide area, and U.S. health systems regularly recruit Canadian nurses and allied health professionals, who usually work under TN status or a green card. The year of the move often needs a dual-status U.S. return, while the Canadian return records the departure date. RRSPs and RRIFs keep their tax deferral in the United States under the treaty, while a TFSA or RESP is treated as an ordinary taxable account for U.S. purposes. With no South Dakota income tax, there is nothing to file at the state level.
Students and Researchers at SD Mines
Canadian students and researchers at the School of Mines on F-1 or J-1 status are usually exempt individuals for the substantial presence test. They generally send in Form 8843 each year and add a nonresident return when they earn U.S. income from a research assistantship, campus wages or a taxable scholarship. The treaty may exempt some payments from U.S. tax. Students who stay after graduation for practical training should check when they become U.S. residents for tax purposes.
Canadians Owning Cabins in the Black Hills
Canadians who buy a cabin near Hill City, Keystone or in the forest around Rapid City often rent it to visitors for part of the summer. That creates several obligations at once:
- Rent paid to a nonresident is subject to 30 percent U.S. withholding on the gross amount unless the owner elects to treat it as business income and files a U.S. nonresident return each year, which usually costs much less.
- Stays of less than 28 days carry South Dakota sales tax and the 1.5 percent tourism tax, plus municipal tax inside a town. If the booking platform does not collect them, the owner must register and file.
- In Canada the rental income is reported on the owner's return, with a foreign tax credit for U.S. tax paid, and foreign property costing more than C$100,000 must be reported on Form T1135.
- When the cabin is sold, the buyer generally must withhold under FIRPTA unless a withholding certificate reduces it, and the sale is reported in both countries.
Canadian Vendors at the Rally and Summer Events
Canadian businesses selling merchandise or food at the Sturgis rally, Rapid City events or summer festivals need a South Dakota sales tax licence and must collect the rate where each sale is made. Federally, the treaty usually keeps a Canadian vendor's profits out of U.S. income tax when it has no fixed place of business here, although a U.S. return may be needed to claim that position, and it should keep records of its days and activities in the country.
Canadian Suppliers to Mining, Energy and Construction
Canadian engineering, equipment and service firms work for mining, energy and construction clients in the Black Hills. Services performed in South Dakota are generally taxable, and a Canadian firm must register for sales tax once its South Dakota sales pass $100,000 in a calendar year or the one before. Expect Rapid City clients to request a W-8BEN-E before paying invoices. Staff sent to work on site need to be considered for U.S. income tax, treaty exemptions and, where the work is in Wyoming or another state, that state's rules.
Rapid City Residents Moving to Canada
U.S. citizens who move from Rapid City to Canada keep filing U.S. returns and begin filing Canadian returns on worldwide income. Military retirees should plan how Canada will tax their U.S. retired pay and Social Security, and anyone keeping a Rapid City house as a rental reports that income in both countries. We plan the move before it happens and prepare both countries' returns afterwards.
Rapid City Cross-Border Tax Questions
I'm Canadian and married to an airman at Ellsworth. Can we file jointly?
Often, yes. A nonresident alien spouse can be treated as a U.S. resident for a joint return, which usually lowers the household's tax but means reporting the spouse's worldwide income. The spouse needs a Social Security number or an ITIN.
I'm Canadian and rent my Black Hills cabin to visitors. What do I file?
In most cases a U.S. nonresident return each year electing to be taxed on net rental income, South Dakota sales and tourism tax returns if the booking platform does not collect them, and the rental on your Canadian return with a foreign tax credit and Form T1135 if required.
Do Canadian students at SD Mines file U.S. returns?
Usually Form 8843 every year, plus a nonresident return in any year with U.S. income such as research pay or campus wages. While on F-1 or J-1 student status they do not normally count days toward U.S. residency.
Does a Canadian vendor at the Sturgis rally need a sales tax licence?
Yes. Anyone selling taxable goods or services in South Dakota needs a sales tax licence and must collect the rate that applies where each sale is made.
Talk to BOMCAS About Cross-Border Tax in Rapid City
The U.S. side for most of these clients runs through personal tax preparation or business tax preparation, and cabin owners and vendors usually need sales and tourism tax registration as well. Canadian companies opening in Rapid City add bookkeeping and payroll, tax planning covers the timing of a move in either direction, and anyone with unfiled years can start with back taxes and late filing. For the general South Dakota rules on everything else, our state pages cover business returns, personal returns, sales and use tax, bookkeeping, payroll, planning and catching up on late filings, with the South Dakota overview tying it all together.
Tell us what is happening in your Rapid City business or household and we will reply with a plan and a quote. Use the BOMCAS contact page or the form at the bottom of this page, phone 780-667-5250 or write to info@bomcas.ca. To see how the pieces fit together, head back to the Rapid City overview. This page gives general information and is not advice on your own situation.