South Dakota Payroll Tax Guide (2026)

With no state income tax to withhold, a South Dakota payroll comes down to one line: reemployment assistance on the first $15,000 per worker, at 1.20% plus a 0.55% investment fee for a new non-construction employer, and a minimum wage that stepped up to $11.85 in January.^[1]

10 min read • Reviewed by Rajanikant Patel CPA • Verified Oct 1, 2026 • Sources: SD DOR, SD DLR, IRS

Quick Facts

South Dakota payroll at a glance

South Dakota has exactly one state payroll tax: reemployment assistance contributions paid entirely by employers on the first $15,000 each worker earns. There is no state income tax withholding and no employee deduction.^[1]

State income tax withholding

None on wages ^[6]

UI taxable wage base

$15,000 per employee ^[1]

New employer UI rate

1.20% ^[1]

Experienced UI rate range

0.00%–9.45% ^[1]

Employee-paid state payroll tax

None ^[1]

Investment fee

0.55% ^[3]

Social Security wage base

$184,500 ^[2]

FUTA net rate

0.6% = $42 per employee ^[10]

State minimum wage

$11.85 per hour ^[5]

Local minimum wage ordinances

None ^[5]

UI registration trigger

An employer becomes liable on meeting any one of six statutory tests,… ^[1]

Exempt salary threshold

$35,568 per year ^[9]

Book a Payroll Consultation Talk to a Payroll Expert

What changed for South Dakota payroll in 2026

Five items moved for South Dakota employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.

Minimum wage rises to 11.85 Administrative fee jumps to 0.08% Wage base stays at 15,000 2026 rate notices mailed 31 Oct Still no trust fund surcharge

Quoting the reemployment assistance rate and forgetting the fees: A new non-construction employer in South Dakota is usually told the rate is 1.20%, but the real first-year cost is 1.75% because a 0.55% investment fee rides on the same 15,000 dollar wage base. New construction employers start at 6.00% plus the same fee, which is 6.55%. Once an employer becomes experience rated, a 0.08% administrative fee is added for 2026 and later years.^[1]

Estimate

2026 South Dakota payroll tax calculator

Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.

South Dakota · 2026 rates · per employee, per calendar year

Annual gross wages ($)

Cash wages subject to payroll tax, before any withholding.

Your UI contribution rate

Your exact rate is on the Annual tax rate notice; notices for calendar year 2026 were mailed to employers on 31 October 2025.

Custom UI rate (%)

FUTA basis

FUTA is 6.0% less a 5.4% credit where the state has no outstanding federal loan.

Employer pays

UI, on first $15,000–

Investment fee, on first $15,000–

Administrative fee, on first $15,000–

FUTA, on first $7,000–

Social Security, 6.2%–

Medicare, 1.45%–

Employer payroll tax–

Withheld from the employee

Social Security, 6.2%–

Medicare, 1.45%–

Additional Medicare, 0.9% over $200,000–

Withheld from employee–

True cost of employment–

Employer tax as % of wages–

Total payroll tax, both sides–

South Dakota does not withhold state income tax from wages, so there is nothing to add here.

Rates & Nexus

Payroll tax rates & the nexus question

South Dakota runs three state payroll taxes. The table below is the whole state layer for 2026.^[1]

The state payroll taxes

Tax	Paid by	2026 rate	Wage base
UI	Employer	0.00%–9.45%; 1.20% new	$15,000
Investment fee	Employer	0.55%	$15,000
Administrative fee	Employer	0.08%	$15,000

Experience rates are set from the employer’s reserve ratio under two schedules. Schedule A runs from 0.00% at a reserve ratio of 2.25% and over up to 9.45% at a ratio below negative 7.00%, and Schedule B runs from 0.00% up to 9.30%. DLR publishes the 2026 rate table only as an image and does not state in text which schedule applies, so the wider Schedule A range is shown here. The automatic trust fund surcharge triggers only when the fund falls below 11 million dollars and none has been imposed since the third quarter of 2010.^[1]

Who has to register

An employer becomes liable on meeting any one of six statutory tests, including paying wages of $1,500 or more in a calendar quarter, or employing one or more individuals, full time or part time, in 20 different calendar weeks in the current or preceding calendar year.^[1]

Multistate and remote employees

When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.

1. Localisation of service→
2. Base of operations→
3. Place of direction & control→
4. Employee’s residence

One remote employee is usually enough. A single person working from home in South Dakota generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.

Confused by South Dakota’s payroll withholding & filing rules?

We handle registration, filings, and year-end forms so your team runs payroll without the guesswork.

Ask a Payroll Specialist

Compliance

Registration & return filing

Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.^[1]

How to register

Cross the wage threshold→
South Dakota Reemployment Assistance online employer services at apps.sd.gov→
Receive account number→
Annual tax rate notice; notices for calendar year 2026 were mailed to employers on 31 October 2025→
File & deposit online

Returns, reports & due dates

Form	What it is	Due
Form 21, Employer’s Reemployment Assistance Quarterly Report	Quarterly unemployment return	April 30, July 31, October 31, January 31
Form 941	Federal quarterly return	Last day of the month after quarter end
Form 940	Federal unemployment, annual	January 31
New hire report	Report of newly hired employees	Within 20 days of start date

Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.^[1]

Pricing

Payroll Pricing

Simple, transparent pricing, no setup fees, no year-end surprises. One flat charge per pay run.

Your Biweekly Payroll Statement

Line items the big providers quietly bill for

NO HIDDEN FEES
CROWNGLOBE

Setup fee

one-time onboarding

billed
extra

Every payroll run

each pay cycle

billed
extra

Off-cycle payroll

corrections & bonuses

billed
extra

Year-end filings

W-2s, 1099s & more

billed
extra

All you actually pay

Per employee, per pay run

$6 /emp

Plus a flat $40 minimum per pay run. That’s the whole bill.

Get Started with Payroll See What’s Included

Wage Base

Subject wages vs. exempt payments

Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.^[1]

Subject wages

Salaries, hourly pay, overtime and piece rates
Commissions, bonuses and incentive pay
Most cash tips reported by the employee
Vacation, holiday and paid sick leave when taken as wages
Severance and payments in lieu of notice
The cash value of meals and lodging provided as compensation
Employer contributions to a non-qualified deferred compensation plan

Not subject

Reimbursements of genuine business expenses under an accountable plan
Employer contributions to a qualified retirement plan
Employer-paid premiums for accident and health insurance
Most third-party sick pay after the sixth calendar month
Payments to a genuine independent contractor
Workers compensation benefits

The wage base is per employer, per year, not per job. If you hire someone in August who already earned $15,000 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.

Reference

Glossary of key terms

Taxable wage base: The slice of each employee’s annual pay that unemployment tax is calculated on. In South Dakota that is $15,000 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
Experience rating: The method South Dakota Department of Labor and Regulation, Reemployment Assistance Division uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
New employer rate: The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
Reserve account: The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
Successor employer: A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
Localisation of service: The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
FUTA credit reduction: A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
Supplemental wages: Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.

Federal, State & Local

South Dakota payroll tax, layer by layer

Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.

Layer 1: Federal

Tax	Rate	2026 base
Social Security	6.2% each side	$184,500
Medicare	1.45% each side	No limit
Additional Medicare	0.9% employee only	Over $200,000
FUTA, standard	0.6% net	$7,000
Federal income tax	Per Form W-4	No limit

South Dakota has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.^[10]

Layer 2: State

Tax	Rate	2026 base
UI, new employer	1.20%	$15,000
UI, experienced	0.00%–9.45%	$15,000
Investment fee	0.55%	$15,000
Administrative fee	0.08%	$15,000
Income tax	None on wages	n/a

Layer 3, county & city: no payroll tax, but a wage floor

No county or city in South Dakota levies its own payroll or income tax withheld by employers. The local layer shows up as minimum wage, not as tax.^[5]

The state minimum wage is $11.85 an hour, effective 2026-01-01. The tipped cash wage is $5.92. No local ordinance sets a higher floor. South Dakota adjusts its minimum wage every year for the cost of living using the Consumer Price Index published by the US Department of Labor, rounded up to the nearest 5 cents, and the rate cannot decrease. The following year’s rate is announced by 15 October. No South Dakota city sets its own minimum wage.^[5]

Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA, and only if the duties test is also met. Paying a salary is not by itself enough.^[9]

FAQ

South Dakota payroll FAQs

No. South Dakota imposes no personal income tax and no corporate income tax, so there is no state withholding account, no state withholding certificate and no annual state reconciliation. Employers still handle federal income tax, Social Security and Medicare withholding as normal.

A new non-construction employer pays 1.20% in year one and 1.00% in years two and three where the account balance is positive, plus a 0.55% investment fee in each of those years. New construction employers pay 6.00% in year one and 3.00% in years two and three, plus the same 0.55% fee. All of it applies to the first $15,000 per employee.

For calendar year 2026 and each year after, employers eligible for experience rating pay an administrative fee of 0.08% on wages. It cannot be credited to the employer’s experience-rating account and it cannot be deducted in whole or in part from employee wages. DLR shows the fee as not applicable for new employers in their first three years.

After three years, DLR calculates a rate each year from the employer’s reserve ratio, which is the balance in the reemployment assistance account measured against taxable payroll for the prior three fiscal years ending 30 June. Rates start at 0.00% for a reserve ratio of 2.25% and over and top out at 9.45% for a ratio below negative 7.00%.

Form 21, the Employer’s Reemployment Assistance Quarterly Report, must be received by the last day of the month following the end of the quarter: 30 April, 31 July, 31 October and 31 January. Reports and payments are filed through the Department’s online employer services.

It is $11.85 an hour from 1 January 2026, and $5.925 an hour for tipped employees. South Dakota adjusts the rate every year using the Consumer Price Index, rounds the increase up to the nearest 5 cents, and by law the minimum wage cannot decrease. The following year’s rate is announced by 15 October.

$15,000 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.

$11.85 an hour. No local ordinance sets a higher rate. The tipped cash wage is $5.92.

April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.

Verification

Sources & methodology

Methodology: every rate, threshold and due date on this page was taken from the administering agency’s own published material for the 2026 tax year, checked on Oct 1, 2026. Where a federal figure applies it comes from the IRS, SSA or US Department of Labor. 4 data points on this page could not be confirmed against a primary source and are either omitted or marked as not published, rather than estimated. Rates change, and some change mid-year, so confirm against your own rate notice before running a payroll.

Get started

Need help with South Dakota payroll compliance?

CrownGlobe runs payroll for U.S. businesses in every state, registration, withholding, filings, and year-end forms.

Book a Free Payroll Consultation

Next step

Running payroll in more than one state?

South Dakota alone means its own registration, its own deposit calendar and its own year-end reconciliation. Add a second state and the work compounds rather than doubles. CrownGlobe runs multistate payroll end to end: registration, deposits, quarterly returns and year-end.

Explore payroll processing services →
Browse all state payroll guides →
Book a free consultation →