The rules where you work $17
A first 30 days checklist, everyday forms, licenses, workers’ comp and taxes for South Dakota, with a yearly calendar. Instant PDF download.
Buy the packet: $17Digital product, all sales final. Informational only, not legal, financial, tax or business advice.
What South Dakota expects from a new trade business
South Dakota has no income tax, and the state's own labor department says no law makes you carry workers' comp. What it does have is a 2% tax on what contractors take in, on top of sales tax on materials. That tax license is the first thing to get here, and the tax belongs in every bid.
No general contractor board, but you still need a state tax license
South Dakota's labor department runs an Electrical Commission and a Plumbing Commission for the trades, and its list of licensing boards shows no board for general contractors or remodelers. If you wire or plumb for pay, you need the license. Electrical contractor status takes four years as an apprentice plus two as a licensed journeyman before you can sit for the exam. Electrical licenses renew every two years, with 16 hours of continuing education. Plumbing has separate licenses for plumbing contractors, water conditioning, sewer and water, and more, and plumbing licenses expire every December 31.
Heating and air? Ask the city or county building office, and the commissions if your work touches gas piping, water piping or wiring. Don't assume you're exempt.
One license nobody in construction skips: anyone who contracts for construction, repair or remodeling of real property needs a contractor's excise tax license from the Department of Revenue, including on repair jobs.
Ask the city building office about local contractor rules and permits before you bid.
Source: SD Dept. of Labor and Regulation, boards and commissions · SD Electrical Commission licensing · SDCL 36-25-14 (plumbing licenses) · SD DOR Contractor's Excise Tax Guide, July 2026 · SD Plumbing Commission
Who to call: an attorney near you
Comp isn't forced on you, but going without is expensive
The Department of Labor and Regulation says it plainly: no law requires a South Dakota employer to carry workers' comp. The price of skipping it is in the statute. An uninsured employer is treated as having opted out of the comp system. An injured worker can then sue you in court, or bring the comp case in circuit court and collect medical plus twice the other compensation the law allows.
Your subs matter too. A principal contractor or sub can be liable for comp to an injured employee of a sub working on the job, to the same extent as that worker's own employer, when the injury happens on premises where the principal contractor is doing the work or has control.
A corporate officer can reject coverage by written notice to the corporation. That statute only names corporate officers, so ask how it fits an LLC member or a sole proprietor. An owner doing the work can buy a policy covering themselves. An insurance agent who writes contractors can price both.
Source: SD Division of Labor and Management, Workers' Compensation · SDCL 62-5-7 · SDCL 62-3-11 · SDCL 62-3-10 · SDCL 62-3-5.1 · SDCL 58-20-3
Who to call: an insurance agent near you
Getting paid: 120 days, and watch the homestead rule
One rule can take the teeth out of a lien on a house:
- File within 120 days of your last work or last material, with the county register of deeds, or the lien ends.
- Before filing, mail the owner a copy by registered or certified mail. The post office receipt gets attached to what you file.
- Sub-subs and suppliers to subs: only if a notice of project commencement was filed and posted, send notice to the contractor by certified or registered mail, with a copy to the owner, no later than 60 days after your last work. Attach the receipts to your lien. Individual laborers with liens under $2,000 are excused.
- Sue: assert the lien in court within 6 years of the last item of your claim.
- Forced suit: if the owner, their agent or the contractor serves you a written demand to sue, you have 30 days or the lien is forfeited.
- Owner's demand: within 15 days after completion, the owner can require an itemized, verified account. You can't sue until 10 days after you furnish it.
- Mid-job: if you work under a contractor, you can serve the owner a sworn account of your claim. The owner then holds back enough to cover it.
- Homesteads: the lien doesn't reach homestead rights to the extent they are exempt from execution.
Miss a lien step and you can still sue whoever you contracted with. Before you count on a lien against someone's home, ask a construction attorney how that homestead rule plays out.
Source: SDCL 44-9-15 · SDCL 44-9-17 · SDCL 44-9-53 · SDCL 44-9-26 · SDCL 44-9-5 · SDCL 44-9-24 · SDCL 44-9-14 · SDCL 44-9-10 · SDCL 44-9-49
Who to call: an attorney near you
Two taxes: sales tax on materials, 2% on your receipts
South Dakota hits contractors twice, and it surprises people from other states:
- Materials: you pay state sales or use tax (4.2%) plus any city tax (1 to 2%) on what you install and on your tools and supplies. If your supplier doesn't charge it, you report use tax yourself.
- Contractor's excise tax: a prime contractor owes 2% of gross receipts on new work, repair and remodeling. Paying your subs doesn't reduce it.
- Subs: you skip the 2% only if the prime gives you a project-specific exemption certificate. Without one you are treated as a prime. Hand out a certificate when you aren't the prime, and you owe the tax plus a 10% penalty. Utility projects run under different rules.
- Flooring: most floor covering sales and installation get sales tax, not excise tax. Ceramic tile, terrazzo and epoxy flooring are excise.
- Mixed jobs: when the main purpose isn't clear, itemize each part, or charge excise on the whole contract if excise work is 25% or more of its dollars.
The tax counts on itself, so the state offers a 2.041% bid factor to collect the full amount, and you can show it as a line on the bill. A CPA who works with contractors can build it into your pricing.
Source: SD DOR Contractor's Excise Tax · SD DOR Contractor's Excise Tax Guide, July 2026
Who to call: a CPA or tax pro near you
LLC, sole proprietor, or S-corp?
You form an LLC with the Secretary of State for $150 online ($165 on paper). The annual report is $55 online ($70 on paper), and a late report costs $55 more. Confirm your due date with the Secretary of State. There's no franchise tax and no publication requirement.
South Dakota has no personal or corporate income tax, so your LLC profit isn't taxed by the state. The 2% contractor's excise tax still applies whatever your entity, and it's on receipts, not profit.
When an S-corp election starts to pay is a numbers question. Bring what the business clears after your floor rate to a CPA and ask them to run it.
Source: SD Secretary of State filing fees · SD DOR Sales and Use Tax Guide, July 2026
Who to call: a CPA or tax pro near you
Education, not legal or tax advice. Rules change. Confirm anything here with a licensed pro in South Dakota before you rely on it. Last updated November 2026.