South Dakota Tax Incentives

Ethanol and Methanol Tax Credit

Licensed fuel blenders may be eligible for a tax credit for gasoline blended with ethanol or methanol to create E85 or M85. The tax credit is granted on a per gallon basis, in the amount that the rate for motor fuel exceeds the rate for E85 or M85. The credit is used to offset any tax liability resulting from the blending of previously untaxed ethanol or methanol. E85 and M85 are taxed at a rate of $0.10 per gallon, and other ethanol blends are taxed at a rate of $0.20 per gallon. (Reference South Dakota Statutes 10-47B-4 and 10-47B-136)

Biodiesel Production Facility Tax Refund

A tax refund is available for contractors' excise taxes and sales or use taxes paid for the construction of a new agricultural processing facility, which includes an expansion to an existing soybean processing facility if the expansion will be used for the production of biodiesel. The project cost must exceed $4.5 million in order to qualify for the refund. (Reference South Dakota Statutes 10-45B)

Ethanol Production Incentive

A $0.20 per gallon production incentive is available to ethanol producers for ethanol that is fully distilled and produced in South Dakota. To be eligible for this incentive, the ethanol must be denatured and blended with gasoline to create an ethanol blend. Cumulative annual production incentives paid out may not exceed $7 million. (Reference South Dakota Statutes 10-47B-162)