South Dakota Administrative Rules
Title 64 - REVENUE
Article 64:06 - Sales tax
Chapter 64:06:01 - Administration of program
Section 64:06:01:58 - Reimbursement for expenditures

Reimbursement for expenditures actually made are not gross receipts when the reimbursement occurs within a relationship where the ownership of the property or service purchased by the person receiving the reimbursement passed directly and immediately upon the purchase to the person who made the reimbursement and the person who made the reimbursement was legally liable for payment for the property or services to the person who sold the property or services.

The reimbursement must be separately stated in the taxpayer's books, records, and billings for auditing purposes.

General Authority: SDCL 10-45-47.1(3).

Law Implemented: SDCL 10-45-1(10), 10-45-1.14.

Examples:

(1) An architect is hired to do a study on the feasibility of renovating a building in another city. In order to make the study the architect purchases a ticket in the architect's own name and flies to the city in which the building is located. In the bill the customer is charged for the cost of the flight. The amount received from the customer is includable in the architect's gross receipts because the customer is not legally liable to pay the airline for the flight.

(2) A court reporter is hired to take a deposition in another city. In order to take the deposition, the court reporter purchases an airline ticket and flies to that city. In the bill, the client is charged for the cost of the airline ticket. The amount received from the client for the flight is includable in the court reporter's gross receipts because the client was not legally liable to the airline for the cost of the ticket.

(3) A seller of real property obtains the abstract for the parcel of land from the abstracter in preparation of a title search. A new deed is subsequently prepared and returned with the abstract to the abstracter. The abstracter updates the abstract and then files the deed in the register of deeds' office. The abstracter pays the filing fees. In the abstracter's bill to the client, the abstracter separately lists the register of deeds' filing fees. Receipt of payment for the filing fees are not includable in the abstracter's gross receipts because the client is legally obligated to pay the fee to the register of deeds' office.

(4) A client hires a real estate broker to sell the client's house. The broker obtains the abstract on the property. In reviewing the abstract, the broker finds the real estate taxes for the previous year have not been paid. The broker then pays the taxes to clear the title. After a buyer is found, the broker prepares a deed and files it in the register of deeds' office. In the bill to the client, the broker separately lists the amount due for payment of the taxes and for the filing fees paid to the register of deeds' office. Payment for the taxes and the filing fees are not includable in the broker's gross receipts because the client is legally obligated to pay the taxes and the filing fees.