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 taxexempt certain payments from a partnership or a limited liability company from the state sales and 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.There are hereby specifically exempted from the provisions of this chapter and from the computation of the amount of tax imposed by it, the gross receipts from services rendered by a natural person to a partnership in which the natural person has a partnership interest, and services rendered by a natural person to a limited liability company that has no employees and is solely owned by the 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.There are hereby specifically exempted from the provisions of this chapter and from the computation of the amount of tax imposed by it, the gross receipts from services rendered by a natural person to a partnership in which the natural person has a partnership interest, and services rendered by a natural person to a limited liability company that has no employees and is solely owned by the natural person.