Tea Sales and Use Tax

Sales Tax for an Industrial Suburb

For many Tea businesses, sales tax questions are less about the register and more about the shop floor: which materials are bought for resale, which equipment is taxable, how to handle sales to customers in other states and what contractors owe on installed work. Lincoln County's new tax in January 2027 and the state change in July 2027 add two rate updates. BOMCAS prepares Tea sales tax returns remotely.

For licensing and taxable services, see the statewide sales and use tax page. Tea's codes, manufacturing purchases and the 2027 changes are covered here.

Tea Rates

Through December 2026: 6.2 percent general (code 344-2) and 7.2 percent on meals, alcohol, lodging and admissions with the 1 percent gross receipts tax (code 344-1).
From January 1, 2027: 6.7 percent general, with Lincoln County's tax added.
From July 1, 2027: 7.0 percent general, with the state rate at 4.5 percent.
Lodging under 28 days adds the 1.5 percent tourism tax.

Manufacturers

Materials that become part of a manufactured product can be bought for resale without tax using an exemption certificate. Equipment, tools, supplies, repair parts and items consumed in production are generally taxable, and use tax is due if no sales tax was charged. Manufacturers buying equipment from out-of-state vendors should check each invoice. Large purchases planned for 2027 can be timed before the January and July increases.

Wholesale and Out-of-State Sales

Sales to other businesses for resale are exempt with a valid certificate on file. Products shipped to customers outside South Dakota are generally not subject to South Dakota tax but may be taxable in the customer's state, where the seller may need to register once sales exceed that state's threshold. Products picked up at the Tea plant by an out-of-state customer are generally taxed here.

Contractors

Mechanical, electrical and building contractors pay the 2 percent contractor's excise tax on gross receipts from realty improvements and sales or use tax on materials. Equipment installed as part of a building, such as HVAC systems, is generally part of the realty improvement, while equipment sold and delivered without installation is a retail sale. Contractors working on projects in Sioux Falls should note that only the Lincoln County side of the city carries the county tax.

Restaurants and Franchises

Restaurants near the interstate charge the 1 percent gross receipts tax on food and drink. Franchise point-of-sale systems should be updated before each rate change.

Tea Pot Days and Events

Vendors at Tea Pot Days and other community events need a South Dakota sales tax licence and charge Tea's rate. Food vendors also charge the gross receipts tax. Nonprofit fundraisers may have special rules, and we can help determine what applies.

Services

Most services are taxable in South Dakota, including repairs, cleaning, lawn care and many business services. Tea service businesses charge the rate where the service is delivered.

Filing

We prepare returns, reconcile them to sales and purchase records, track exemption certificates and update rates for both 2027 changes.

Exemption Certificates

Sales to the Tea Area School District, churches, exempt nonprofits and resellers need valid certificates on file. Manufacturers buying materials for resale should give their own suppliers a certificate as well, and keep copies in case of audit.

Freight and Delivery

Delivery charges billed by the seller are generally part of the taxable sale when the product is taxable. Separately stated freight does not escape tax on a taxable sale in South Dakota, so invoices should be set up accordingly.

Returns can be filed monthly or less often if the Department of Revenue allows, and we keep a calendar so no period is missed.