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South Dakota

South Dakota payroll taxes: Your 2026 guide to staying compliant

By QuickBooks
Published on April 24, 2026

While it's one of the least-populated states in the country, South Dakota has a growing economy that's becoming increasingly diverse. Agriculture remains a key economic mainstay, and key industries like manufacturing, biosciences, livestock development, and value-added agriculture continue to contribute to the state's growth. There are over 96,000 small businesses in South Dakota, making up nearly 99% of all companies within the state and employing over half of all employees. South Dakota is a business-friendly state, and it’s important to understand your payroll responsibilities here as an employer.

In this guide, we'll explore key details about payroll taxes in South Dakota, empowering you to set your business up for success while staying compliant.

Jump to:

What are payroll taxes?

Payroll taxes are taxes based on wages, salaries, or other compensation that both employers and employees must pay. While income taxes are also withheld through payroll, payroll taxes specifically fund programs like Social Security, Medicare, and unemployment insurance.

Understanding South Dakota payroll taxes

When starting a business in South Dakota, you'll need to understand both federal and state payroll taxes.

Federal payroll taxes

Payroll taxes are mandatory and encompass both federal and state requirements. 

Federal payroll taxes include:

  • Federal income tax: This is withheld from each employee's paycheck based on their W-4 form and the current IRS tax brackets. You'll be responsible for calculating the correct amount, withholding it, and then sending it to the IRS.
  • Social Security and Medicare taxes: Both of these taxes have a portion paid by the employee and a matching portion paid by you, the employer. For Social Security, the combined rate is 12.4% on the first $176,100 of wages in 2025. For Medicare, it's 2.9% on all wages, with an extra 0.9% for higher earners. You'll withhold the employee's portion and match it.
  • Federal Unemployment Tax (FUTA): This is paid solely by you at a rate of 6% on the first $7,000 of each employee's wages. However, most employers get a 5.4% credit, reducing the rate to 0.6%. The graphic below lists some best practices for managing your FUTA obligations.
Futa best practices for small businesses

South Dakota state payroll taxes

In addition to federal payroll taxes, South Dakota employers must also account for state-specific payroll taxes. South Dakota only has one state payroll tax:

  • Reemployment Assistance tax (RA): The Reemployment Assistance program (formerly known as the Unemployment Insurance program) provides temporary financial assistance for individuals who lose their jobs through no fault of their own. The tax rate applies only to the first $15,000 of an employee's annual wages in 2025. New employers in South Dakota are eligible for a reduced tax rate for the first three years of business. After that, the South Dakota Department of Labor and Regulation (DLR) calculates the RA tax rate for every business annually. 

South Dakota local payroll taxes

South Dakota does not allow individual cities to impose their own local payroll taxes on top of federal and state payroll taxes. However, some areas may impose other local taxes that businesses should be aware of. 

  1. Check with your local government to find out if your business is subject to any local taxes. Your city or county government directly can provide the most up-to-date information on applicable rates and regulations.
  2. Consult a tax professional if you need clarification on local tax requirements or assistance with compliance. An accountant specializing in South Dakota payroll taxes can help ensure your business stays compliant.

Other important tax considerations

Multiple locations

If your business has employees working in multiple jurisdictions, you may be subject to different local payroll taxes for each location.

Changing rates

Local payroll tax rates can change over time, so it's important to stay informed about any updates that may affect your business.

Employer responsibilities for payroll taxes in South Dakota

As a South Dakota employer, it's your responsibility to navigate federal and state payroll, ensuring full compliance. You must carefully calculate applicable taxes and accurately report those taxes to numerous government agencies. Here's what you need to know.

Registering for payroll taxes

When starting a business in South Dakota, you must register for payroll taxes to ensure you comply with state and federal tax obligations. Understanding the registration process will help you stay in good standing with government agencies and avoid penalties. Here are the necessary steps to register:

  • Obtain an Employer Identification Number (EIN): Before registering for state payroll taxes, you need a federal Employer Identification Number. You can easily apply for an EIN directly through the IRS website.
  • Register with the South Dakota Department of Labor and Regulation: With your EIN, you can register with the South Dakota Department of Labor and Regulation (DLR). The registration requires information about your company's structure, business name, address, and payroll start date.

Calculating payroll taxes

To avoid penalties, you must calculate payroll taxes accurately. You have a few options to do this:

  • Check government websites: Once you've completed the registration process, you can log into your account on the South Dakota DLR website, view your current South Dakota state tax rate, and see report filing deadlines. You can also use the online portal to report new hires.
  • Payroll software: Some small business software payroll programs have a built-in South Dakota payroll tax calculator or table that automates calculations, saving you time and minimizing the chance for errors.
  • Professional services: If you prefer to outsource payroll, a professional payroll service can handle everything for you.

Whichever method you choose, make sure you stay updated on the current tax rates and wage limits, as these can change every year.

Withholding state payroll taxes

In South Dakota, the only state-specific payroll tax is the Reemployment Assistance tax, which is funded entirely by employers. Here's a quick breakdown of how you'd determine how much your business will pay per employee.

Reemployment Assistance Tax (RA): The RA tax rate varies. During their first year in business, standard new employers must pay a tax rate of 1.2%. New construction employers pay 6% in their first year. All new employers are also subject to a 0.55% investment fee for each employee. Established businesses pay between 0.00% and 9.83%, plus a potential administrative fee of 0.02%, with the South Dakota DLR's Reemployment Assistance Tax Unit calculating the new rate annually based on experience rating and other factors. The RA tax applies to the first $15,000 an employee earns in 2025.

  • Example: Let's say you're a new employer in the first year of business. If you pay an employee $12,000 during the first quarter of the year, your first RA tax payment would be $210 for that employee. (First-year rates for new non-construction businesses are 1.2% plus the 0.55% investment fee, equaling 1.75% on $12,000.) 

During the second quarter, when the employee makes the same amount, you'd pay just $52.50 because their wages reached the $15,000 wage base threshold. For the third and fourth quarters, you wouldn't pay any additional state payroll taxes on that employee.

Keep in mind that although there is no state income tax withholding for South Dakota, you must still withhold applicable federal payroll taxes.

By applying these calculations to each paycheck, you ensure accurate withholdings and compliance with state requirements.

Remitting state payroll taxes

After calculating how much your business must pay in South Dakota RA payroll taxes, you'll need to file a report with the Reemployment Assistance Tax Unit and submit a payment. These taxes are due quarterly, with filing periods opening on the first day of April, July, October, and January. 

Filing payroll tax returns in South Dakota

In South Dakota, employers must comply with quarterly payroll tax return requirements to meet state and federal obligations. Here's a breakdown of 2025 requirements:

Quarterly requirements

South Dakota does not require additional payroll tax forms beyond Form 21. However, employers must file a return for each quarter regardless of whether RA tax is owed. 

Annual requirements

Outside of federal payroll tax returns, there are no annual requirements for most businesses in South Dakota. However, there are a couple of exceptions.

Penalties for late filing or non-compliance and tips for staying organized

Payroll taxes in South Dakota are due every quarter, even if no RA taxes are owed. Failing to file quarterly reports and pay the Reemployment Assistance tax can lead to penalties. The penalty for filing or paying late is $25 per full or partial month from the deadline. You'll also incur interest on unpaid taxes at a rate of 1.50% per month or partial month until you handle your tax obligations. In the worst-case scenario, the state may also obtain payroll records through subpoenas and take other enforcement measures.

Filing and paying payroll taxes are crucial. Here are a few tips to help you stay organized and cover your tax obligations on time, every time.

Set reminders

Keep track of payroll tax deadlines on your calendar. Consider setting reminders on your phone or computer to stay organized. You can also utilize task management or payroll software tools to stay ahead of all due dates.

Watch for South Dakota DLR Reminders

The South Dakota DLR does help employers comply with all deadlines. If you filed a paper report for previous quarters, the state will mail forms to your business in the last week of every quarter. If you file electronically and provide your email, the state will send email reminders. Keep an eye out for this correspondence, and make a habit of completing reports as soon as you receive them.

Consider payroll software

Invest in reliable payroll software that automatically calculates taxes and reminds you of upcoming deadlines. You’ll minimize calculation mistakes and missed payments.

Seek professional help

Another way to avoid penalties is to work with professionals. A tax professional or accountant can help you navigate the complexities of tax compliance. They're there to answer questions and concerns while helping you comply with all payroll tax obligations. They can provide expert guidance and assist you in managing all the logistics.

Pre-tax vs post-tax payroll deductions

Payroll tax credits and incentives

South Dakota has a favorable tax environment for businesses of all sizes. Beyond the Reemployment Assistance Tax, there are no additional payroll taxes to cover, making it already business-friendly from a state tax standpoint. As a result, there are no major state-specific payroll tax credits or incentives. However, several options are available at the federal level to help reduce your overall federal tax liability. Here are some credits and incentives that are available to South Dakota employers.

Federal Unemployment Tax Act (FUTA) Credit

This credit can give employers a 5.4% reduction in federal unemployment taxes. By timely paying South Dakota's Reemployment Assistance tax in full, most employers qualify for a federal reduction, resulting in a net FUTA tax rate of as low as 0.6%.

Work Opportunity Tax Credit

This tax credit rewards employers for hiring individuals from specific targeted groups, including veterans, individuals with prior felony convictions, and others who might otherwise face barriers to employment. The WOTC allows you to reduce your federal tax liability by up to $9,600 for each eligible new hire.

Federal Research and Development (R&D) Payroll Tax Credit

South Dakota offers no state-specific research and development tax credit to businesses. However, qualifying small businesses can use their federal R&D payroll tax credit to offset a portion of their employer-paid payroll taxes. Qualified businesses can elect to apply up to $500,000 of research credit to payroll liabilities in 2025. 

Industries frequently benefiting from South Dakota business tax credits

  1. Tech companies. Companies engaged in research and development may qualify for the federal R&D Tax Credit. South Dakota's growing industries, such as cybersecurity, precision agriculture, and bioscience, can benefit from the credit to offset federal payroll taxes.
  2. Agriculture. Agriculture remains a significant contributor to South Dakota's economy. Specific sectors, such as the state's dairy industry, are among the fastest growing in the country. Employers in South Dakota's vast agricultural industry may qualify for the WOTC if they hire individuals from specified target groups.

Consult with a tax professional to understand what tax credits and incentives you could potentially apply to your business. 

Common payroll tax mistakes in South Dakota (and how to avoid them)

Despite South Dakota's simpler payroll tax landscape, costly mistakes can still happen. Here are some of the most common mistakes employers make–and how you can stay compliant.

Misclassifying workers

Incorrectly classifying workers as independent contractors can lead to substantial penalties. South Dakota Codified Law 61-1-11 outlines the factors that distinguish independent contractors from employees. Classify workers according to state law and consult a tax professional when in doubt.

Missing quarterly deadlines

Quarterly filing periods last an entire month, providing ample time for employers to file reports and pay any taxes due. Set reminders or use payroll software to stay on top of the quarterly schedule. Missing deadlines could result in penalties and interest on unpaid RA taxes.

Ignoring applicable tax rates

The South Dakota RA tax rates vary. While new businesses get a reduced rate during their first three years, the existing businesses’ tax rates are assessed annually. Log in to your account or contact the South Dakota DLR directly to determine your current tax rate. Always review your RA tax rate to ensure you're performing correct calculations and covering your tax obligations.

Poor recordkeeping

Review all timesheets for accuracy, and remember to consider excess pay, such as overtime. Keep records safe for at least one to three years to ensure you have access to relevant data for completing any necessary annual reconciliations.

Failing to file quarterly reports after reaching the wage base

Employers in South Dakota are required to file payroll information quarterly. While the state RA payroll tax in South Dakota only applies to the first $15,000 of wages earned by every employee, you must continue to submit quarterly reports to avoid penalties.

Forgetting to report new hires

Make it a habit to report new hires immediately via the South Dakota DLR website after completing the hiring process. Failing to do so will lead to penalties.

Tip: QuickBooks Payroll can help you avoid these common mistakes by automating calculations, tracking deadlines, and keeping accurate records.

How to manage your small business payroll obligations 

Understanding the nuances of South Dakota's payroll taxes and regulations can take some time. Follow our small business tax preparation checklist and these steps to help you manage your payroll taxes.

Step 1. Partner with a tax professional

Consult a tax professional familiar with South Dakota's payroll taxes and regulations. They can guide you through compliance requirements, local tax nuances, and potential tax benefits for your business.

Step 2. Explore payroll software

Consider using payroll software to streamline your payroll processes. Tools like QuickBooks automate tax calculations, minimize errors, and ensure compliance with South Dakota laws.

Step 3. Proactively plan for compliance

Stay informed about South Dakota's payroll tax deadlines and updates. Payroll software combined with expert guidance can help ensure you meet state and local requirements.

Step 4. Optimize your tax strategy

Work with your tax professional to uncover deductions, credits, or other incentives that could benefit your business. Leverage software reports to better understand your payroll data and identify opportunities for savings.

Step 5. Build a financially strong foundation

By combining expert guidance with the right tools, you can efficiently manage payroll taxes and focus on growing your business in the Mount Rushmore State.

What are the payroll taxes in South Dakota?

South Dakota's payroll taxes consist of a single tax: The Reemployment Assistance (RA) Tax, formerly known as the Underemployment Insurance (UI) Tax. Employers are solely responsible for paying this tax. Unlike federal payroll taxes, employees don't contribute to this tax obligation, and there is no paycheck withholding for the RA tax. Tax rates are assessed annually and apply to every nonexempt employee.

Calculating payroll taxes in South Dakota

Payroll tax calculations in South Dakota depend on several factors, including:

  • Annual RA tax rate
  • Employee's wages
  • Federal taxes

For employees, the main payroll taxes are: 

  • Federal income tax
  • FICA (Social Security and Medicare taxes)

For employers, the main payroll taxes are:

  • South Dakota Reemployment Assistance (RA) Tax
  • Federal Unemployment Tax (FUTA)

To better understand and calculate South Dakota's payroll taxes, you can refer to the South Dakota Department of Labor and Regulation's Reemployment Assistance Tax Unit. There, you can register your business, see your applicable payroll tax rate, file reports, and make payments. You can also turn to payroll software configured with South Dakota-specific data or consult a tax professional for guidance.

It's essential to stay up-to-date on the current rates and regulations, as they can change annually.

Leverage payroll software for compliance in South Dakota

Managing payroll in South Dakota requires accuracy due to complex regulations. Errors can lead to penalties and legal risks, but QuickBooks streamlines payroll management to ensure compliance. It automatically calculates, files, and pays federal and state payroll taxes—with a 100% accuracy guarantee.** You'll stay current with South Dakota tax law changes, easily generate reports for filings, and get up to $25,000 in penalty coverage if issues arise.**




Disclaimer: 

**Accuracy Guaranteed: Available with QuickBooks Online Payroll Core, Premium, and Elite. We assume responsibility for federal and state payroll filings and payments directly from your account(s) based on the data you supply. As long as the information you provide us is correct and on time, and you have sufficient funds in your account, we’ll file your tax forms and payments accurately and on time or we’ll pay the resulting payroll tax penalties. Guarantee terms and conditions are subject to change at any time without notice.

Tax penalty protection: If you receive a tax notice and send it to us within 15 days of the tax notice we will cover the payroll tax penalty, up to $25,000. Additional conditions and restrictions apply. Only QuickBooks Online Payroll Elite users are eligible to receive tax penalty protection.

This content is for information purposes only and information provided should not be considered legal, accounting or tax advice or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.




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