In South Dakota, a Certificate of Exemption, which is also called a resale certificate in many states, allows businesses to purchase inventory without paying sales tax.  In order to do so, the retailer will need to provide a South Dakota Certificate of Exemption to their vendor. 

Learn more about how the South Dakota Certificate of Exemption works, how to get one, and more.

Related: Guide to starting a business in South Dakota

What is a South Dakota Certificate of Exemption?

When retailers purchase products to resell, they often don’t pay state sales tax to the supplier on the purchase. The sales tax will still be paid, but instead of the retailer paying sales tax, the retailer charges sales tax to their customer on the final value of the merchandise. The collected sales tax is then sent by the retailer to the South Dakota Department of Revenue.

Let’s consider a sports equipment store in South Dakota. With a valid Certificate of Exemption, the store owner can purchase sporting goods such as baseball bats, basketballs, and tennis rackets from suppliers without paying sales tax on those transactions. When a customer visits the store and purchases a baseball bat, the retailer will charge sales tax to the retail customer based on the full price of the bat. The retailer will take all of the sales tax that was collected and periodically remit the sales tax to the state.

It’s worth noting that the sales tax exemption is only intended to be used for inventory that will be resold and not intended for the tax-free purchase of items used in normal business operations such as paper, pens, etc.

How to fill out the South Dakota Certificate of Exemption (EFORM – 1932)

Before a business starts selling products or providing taxable services, it must first get a South Dakota Sales Tax License from the South Dakota Department of Revenue. The Sales Tax License is sometimes referred to as a seller’s permit, sales tax number, or sales tax license. After registering for the license, a state sales tax number will be provided by the South Dakota Department of Revenue. This number will be listed on the Certificate of Exemption.

Step 1: Begin by downloading the South Dakota Certificate of Exemption Form EFORM – 1932 
Step 2: Indicate whether the Multistate Supplemental form is being attached.  This is the second page of the exemption form.  Several states joined together under the Streamlined Sales Tax Agreement to accept one resale form to make it easier for merchants.
Step 3: Check whether the certificate is for a single purchase. Otherwise, the form is considered a blanket certificate that allows a buyer to purchase multiple times from a vendor without having to file a separate certificate.
Step 4: Include the name, address, and State Tax ID Number.  If there is no State Tax ID Number, enter the purchaser’s FEIN and Driver’s license number.
Step 5: Enter the name and address of the seller.
Step 6: Check the box that corresponds closest to the type of business the buyer is in.
Step 7: Indicate the reason for exemption.  Most retailers are going to check box G for Resale. 
Step 8: The purchaser will certify the property being purchased is for resale, including their title, phone number, and email address, and then sign and date the certificate. 

South Dakota Certificate of Exemption FAQs