SD EForm - 1774
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South Dakota Department of Revenue
Direct Payment Permit Application
What is a Direct Payment Permit?
A Direct Payment Permit is a permit issued by the department that allows the holder to accrue and pay the use tax on their purchases
directly to the Department. The Direct Payment Permit holder may issue a copy of their Direct Payment Permit or acceptable evidence
that includes their Direct Payment Permit number to the vendor from whom the holder purchases tangible personal property or services.
Businesses that receive acceptable evidence of a Direct Payment Permit from their customer are not required to pay sales tax on those
sales, except on certain transactions not permitted.
Who qualifies for a Direct Payment Permit?
To qualify for a Direct Payment Permit, the taxpayer must have a sales, use, manufacturer, or wholesaler tax license and must meet the
(1)Applicants for a Direct Payment Permit shall demonstrate the applicant’s ability to comply with the department’s sales and use tax
laws and reporting and payment requirements. The applicant must provide a description of the accounting system used by the applicant
and demonstrate that the accounting system reflects the proper amount of tax due.
(2)Applicants must establish a business purpose for seeking a Direct Payment Permit and must demonstrate how direct payment will
benefit tax compliance. For example, the utilization of direct payment authority should accomplish one or more of the following:
a.Reduce the administrative work of determining taxability; collecting, verifying, calculating or remitting the tax;
b.Provide for accurate compliance in circumstances where determination of taxability of the item is difficult or impractical at the time
c.Provide for more accurate calculation of the tax where new or electronic business processes such as electronic data interchange, evalu-
ated receipts settlement, or procurement cards are utilized;
d.Provide for more accurate determination and calculation of tax where significant automation or centralization of purchasing or account-
ing processes have occurred and applicant must comply with the laws and regulations of multiple state and local jurisdictions.
(3)A business must meet a volume threshold of annual purchases of tangible personal property and services of at least $3 million, which
are subject to sales and use taxes.
(4)The business must file and pay or agree to file and pay monthly sales and use tax returns.
(5)The business must file and pay or agree to file and pay by electronic means.
(6)The business must agree that its name may be published as a Direct Payment Permit holder on the department’s website and in any
other related publication, and may be disclosed as a Direct Payment Permit holder in any other manner for tax administration purposes.
How does a taxpayer apply for a Direct Payment Permit?
If all of the criteria are met, the taxpayer must complete the Direct Payment Permit application. The Direct Payment Permit may be used
for all businesses that are licensed under a single Federal Identification number. Businesses who file under more than one Federal Iden-
tification number must obtain a separate Direct Payment Permit for each Federal Identification number.
The secretary or his/her designee shall review all permit applications. When the department approves the issuance of a Direct Payment
Permit, the department will assign the business a Direct Payment Permit and send the business a Direct Payment Permit.
The permit applies only to the business to which it is issued and may not be used by a subsidiary or an affiliate of the business. If a
business that has a Direct Payment Permit restructures it business into a new business entity, the new entity must apply for a permit of
A Direct Payment Permit is not transferable, and the use of a direct payment permit may not be assigned to a third party. Direct Payment
Permits may be revoked by the secretary whenever the secretary determines that the business holding the permit has not complied with
the provisions of this regulation or that the revocation would be in the best interests of the department. The holder of a direct payment
permit may contest a revocation pursuant to the provisions of chapter 1-26.
RV 140 05/11