An Act to exclude guaranteed payments made to partners from the definition of gross receipts, and to exempt guaranteed payments made to partners from the state use tax.

Be it enacted by the Legislature of the State of South Dakota:

Section 1. That a NEW SECTION be added to chapter 10-45:

For purposes of the tax imposed by this chapter, gross receipts do not include any guaranteed payment, as described in 26 U.S.C. § 707(c) (1986), to a partner who is a:

(1) Natural person;

(2) Corporation whose only employees are owners of the corporation; or

(3) Limited liability company that has no employees and is owned by a natural person.

Section 2. That a NEW SECTION be added to chapter 10-46:

Exempt from the provisions of this chapter, and the tax imposed by it, are the gross receipts from any guaranteed payment, as described in 26 U.S.C. § 707(c) (1986), to a partner who is a:

(1) Natural person;

(2) Corporation whose only employees are owners of the corporation; or

(3) Limited liability company that has no employees and is owned by a natural person.