South Dakota does not impose a general corporate income tax

# Summary

South Dakota does not impose a general corporate income tax. The Department of Revenue says so in exactly those words, and there is no corporate income tax return for ordinary trading, manufacturing, or service corporations.

That is not the whole answer, and the missing half matters in South Dakota more than it would almost anywhere else. Financial institutions — banks, trust companies, savings and loan associations, mortgage lenders and brokers, and consumer lenders — pay the bank franchise tax, which the same Department describes as "an income tax," measured at 6 percent of net income assignable to the state.

South Dakota is a major bank and trust charter domicile. For a client in that sector, "South Dakota has no corporate income tax" is a wrong answer, not merely an incomplete one. This page is titled "no general corporate income tax" for that reason.

# The Department says both things

Both of the following are published by the South Dakota Department of Revenue, and both are current. Reading either without the other produces a wrong answer.

On its Business Tax page, under the heading "Corporate Income Tax":

"South Dakota does not impose a corporate income tax."

In its Tax Fact on Financial Institutions:

"The bank franchise tax is an income tax imposed in lieu of other taxes"

There is no contradiction once the scope of each is understood. South Dakota has enacted no income tax of general application to corporations. It has enacted an income tax on a defined class of taxpayers — financial institutions — and named it a franchise tax. The Department's Business Tax statement addresses the first; the Tax Fact addresses the second.

The practical consequence is that summary statements of South Dakota's tax position — including ones published by the state — routinely say "no corporate income tax" without qualifying it. That phrasing is accurate for the general rule and wrong for a bank, trust company, or consumer lender. Where the client is a financial institution, go to the Tax Fact and SDCL chapter 10-43 rather than to any general summary.

# The exception — bank franchise tax

Imposition. SDCL § 10-43-2: "An annual tax is hereby imposed on each financial institution doing business in this state or licensed to do business in this state during any part of its tax year."

Base and rate. SDCL § 10-43-4 provides that liability "shall arise upon the first day of each tax year and shall be based upon the net income assignable to this state at the rate of six percent on net income of four hundred million dollars or less; at the rate of five percent on net income exceeding four hundred million dollars but equal to or less than four hundred twenty-five million dollars; at the rate of four percent on the net income exceeding four hundred twenty-five million dollars but equal to or less than four hundred fifty million dollars; at the rate of three percent on the net income exceeding four hundred fifty million dollars" and lower rates above that. The rate structure is regressive by bracket — the highest rate applies to the lowest band of income.

Minimum tax for trust businesses. SDCL § 10-43-90 sets an annual minimum tax for a financial institution authorised to engage in the trust business, scaled by how long it has been authorised: five hundred dollars for fewer than twelve months, rising through two thousand, five thousand and ten thousand dollars, to twenty-five thousand dollars at forty-eight months or more.

In lieu of other taxes. Per the Department's Tax Fact, the bank franchise tax is imposed in lieu of other taxes, with these exceptions: taxes upon a financial institution's real property; taxes upon its leased sites; tangible personal property not normally used in the extension of credit; and the retail occupational sales or use tax on tangible personal property.

# Who counts as a financial institution

The class is defined broadly, and it is wider than "bank."

The Department's Tax Fact lists: "banks, production credit, trust companies, savings and loan associations, mutual savings banks, mortgage lenders and brokers, money-lending businesses, and any person in the business of buying loans, notes, or other evidences of debt."

SDCL § 10-43-1(4) defines "Financial institution" as "any banking institution, production credit association, or savings and loan association organized under the laws of the United States and located or doing business in this state; any bank, savings and loan association, mutual saving bank, or trust company, organized under the laws of this state or of any other state, district, territory, or country, doing business within this state; any person licensed in this state pursuant to chapter 54-4, the installment repayment small loan and consumer finance law; and any person in the business of buying loans, notes, or other evidences of debt except those persons registered as broker-dealers pursuant to chapter 47-31B."

Note the form-neutrality. SDCL § 10-43-1(1) defines "Corporation" for this chapter to mean "joint stock companies, limited partnerships, limited liability companies, and associations organized for pecuniary profit." A lending or trust business organised as an LLC or limited partnership is therefore inside the chapter, not outside it. See the partnership determination.

Exclusions: broker-dealers registered under chapter 47-31B, and money transmitters licensed through the Division of Banking, which the Department states do not owe bank franchise tax.

# Filing consequences

An ordinary South Dakota corporation files no state income tax return, computes no state apportionment, and tracks no state net operating loss, because there is no general corporate income tax.

A financial institution within SDCL § 10-43-1(4) does file. Every financial institution regularly engaged in business in South Dakota at any time during the year must file a bank franchise tax return with the Department's Special Tax Division, and its liability arises on the first day of each tax year.

Corporations of both kinds may still owe sales and use tax, contractor's excise tax, and other transaction taxes.

# Coverage and verification

Tax years covered: 2025.

Verified on 2026-08-13 against the South Dakota Department of Revenue's Business Tax page as then published, the Department's Tax Fact on Financial Institutions (July 2023 edition, the edition then current on the Department's site), and SDCL chapter 10-43 as published in this library.

This determination is recorded with status "not-imposed-with-exception" rather than "not-imposed" because the exception is substantial and reaches a sector for which South Dakota is a leading domicile. Any consumer of this determination that treats status as a boolean should treat this jurisdiction as taxed for financial institutions.

# Sources

South Dakota Department of Revenue, Business Tax — Corporate Income Tax — https://dor.sd.gov/businesses/taxes/

South Dakota Department of Revenue, Tax Fact: Financial Institutions (July 2023) — https://dor.sd.gov/media/q34fhrne/financial-institutions.pdf

South Dakota Department of Revenue, Bank Franchise Tax — https://dor.sd.gov/businesses/taxes/bank-franchise-tax/

SDCL §§ 10-43-1, 10-43-2, 10-43-4, 10-43-90, as published in this library.