How to Do Payroll in South Dakota: Step-by-Step Guide

Last reviewed: July 2026

South Dakota is one of the simpler states to run payroll in, mainly because there is no state income tax to withhold. That doesn't mean there's nothing to do — you still have a federal EIN to get, a state unemployment account to open, minimum wage and payday rules to follow, and W-2s to file every January. Here's the process from your first hire to year-end.

1. Get a Federal EIN

Every employer needs an Employer Identification Number from the IRS before doing anything else. Apply free at irs.gov/ein, and you'll have the number in minutes if you apply online. You'll use this EIN on federal filings, your South Dakota registrations, and your business bank account.

2. Register With the State

South Dakota does not collect personal income tax, so there is no state withholding certificate to worry about and no withholding account to open. New employers still typically register with the South Dakota Department of Revenue for other business taxes such as sales tax if the business sells taxable goods or services. Check the Department of Revenue's business section to see which registrations apply to your situation before your first payroll.

3. Set Up Your SUI Account

Your one mandatory state payroll tax registration is unemployment insurance, called Reemployment Assistance in South Dakota. Register with the South Dakota Department of Labor and Regulation as soon as you have an employee. New employers are assigned a standard rate of 1.2% for non-construction industries (plus a 0.55% investment fee) on the first $15,000 of each employee's wages for 2026. Quarterly wage reports are due the month after each quarter ends.

4. Pay Frequency and Final Pay

South Dakota law sets a floor, not a ceiling: wages must be paid at least once a month, though weekly, biweekly, and semimonthly schedules are all common and legal. If you never post a specific payday, state law presumes wages are due on the last Saturday of the month, so it pays to pick a schedule in writing. The state's minimum wage for 2026 is $11.85 per hour ($5.925 for tipped employees who receive enough tips to reach the full minimum), adjusted each year under the state constitution's cost-of-living formula.

When someone leaves, final wages are due by the next regular payday, whether the employee quit or was let go. Employers who miss that deadline can owe penalty wages for every day the paycheck is late, up to 30 days, so don't let a final check slip through the cracks during a busy week.

5. Report New Hires

Federal and state law require you to report every new or rehired employee within 20 days of their start date through the South Dakota New Hire Reporting Center. The report just needs the employee's name, address, Social Security number, and start date, along with your EIN. Most payroll software submits this automatically once you enter a new employee.

6. Run Payroll and Make Deposits

Each pay period, calculate gross wages, withhold federal income tax based on the employee's W-4, and withhold FICA (Social Security and Medicare). Match the employee's FICA withholding dollar for dollar as the employer, then deposit both federal withholding and FICA on the IRS schedule that applies to your business, either monthly or semiweekly depending on your total liability. File Form 941 each quarter to reconcile what you withheld and deposited. Since there's no state withholding, your federal deposit schedule and your Form 941 filings are the whole story on the tax side, apart from the SUI wage reports you file with the Department of Labor and Regulation.

Use our paycheck calculator to check gross-to-net math for South Dakota employees, and point new hires to our W-4 helper if they need help filling out their federal withholding form.

7. File Year-End W-2s

By January 31 each year, issue Form W-2 to every employee and file copies with the Social Security Administration. File your fourth-quarter Form 941 and annual Form 940 (federal unemployment) by the same date. On the state side, your last SUI wage report for the year is due on the normal quarterly schedule. Because South Dakota has no income tax, there's no state W-2 reconciliation return to file, which removes one more form from your year-end checklist compared with most other states.

Skip the Paperwork and Let PDS Run It

Everything above is manageable for a business with a handful of employees, but it still takes real time every pay period, plus attention to deadlines that don't forgive being a few days late. Because South Dakota has no state income tax, payroll here is mostly federal filings and deposits plus quarterly SUI reporting — and Pacific Data Services, in business since 1969, handles that combination remotely for employers across the state. No commute, no software subscription to babysit, and no wondering whether this quarter's deposit went out on time.

See how Pacific Data Services handles South Dakota payroll remotely →

Frequently Asked Questions

Do South Dakota employers withhold state income tax?

No. South Dakota has no state income tax, so there is no state withholding form and nothing to remit to a state revenue agency for withholding purposes. Payroll in South Dakota is built around federal withholding plus the state SUI tax.

How often must South Dakota employers pay employees?

South Dakota law requires wages to be paid at least once a month. If an employer does not designate a specific payday, state law presumes wages are due on the last Saturday of each month. Weekly, biweekly, and semimonthly schedules are all common and allowed.

Is workers' compensation insurance required in South Dakota?

South Dakota is unusual in that no state law forces private employers to carry workers' compensation insurance. Employers who go without it lose several legal defenses if a worker sues over a job injury, so most South Dakota businesses carry a policy anyway.

What is the SUI wage base and new employer rate in South Dakota for 2026?

For 2026, South Dakota's SUI taxable wage base is $15,000 per employee, and the standard new employer rate is 1.2% for non-construction industries, plus a 0.55% investment fee. Rates are set by the Department of Labor and Regulation and can change from year to year.