(A) Licenses.
(1) On-sale and off-sale license.
(a) Any municipality that has obtained a license under SDCL Title 35 may issue licenses pursuant to § 113.15 and SDCL § 35-4-2(12) and (16).
(b) If a municipality has been issued an off-sale license only, the governing body may approve or disapprove applications for on-sale licenses issued pursuant to SDCL § 35-4-2(4). If a municipality has been issued an on-sale and off-sale license, the governing body may, by resolution, enter into an operating agreement with any person for the specific purpose of operating an on-sale establishment or an off-sale establishment, or both for the municipality.
(SDCL § 35-4-19)
(2) Malt beverage license. The municipality may also enter into an operating agreement with an individual to operate a malt beverage license that the municipality owns.
(3) Off-sale license only. If a municipality has been issued an off-sale license only, the governing body may, by resolution, enter into an operating agreement with the manager of a legitimate operating business concern for the specific purpose of operating the off-sale establishment for the municipality.
(SDCL § 35-4-22)
(B) Provisions of agreement. An operating agreement under SDCL § 35-4-19 shall include:
(1) The manager is responsible for all operating expenses, including taxes, insurance, and license fees, if any;
(2) The manager may dispense only alcoholic beverages supplied by the municipal off-sale establishment;
(3) The agreement shall be for a period not to exceed five years with the provision of one extension also not to exceed five years in the discretion of the governing body;
(4) The agreement may be canceled by 90-days’ written notice by either party;
(5) The manager shall pay for all alcoholic beverages supplied by the municipal off-sale establishment, the actual cost price, the transportation charges and markup, and any additional compensation or fee as may be mutually agreed upon by both parties;
(6) A complete and detailed record shall be maintained by the municipality of all alcoholic beverages supplied the on-sale manager. All alcoholic beverages shall be evidenced by prenumbered invoices prepared in triplicate showing the date, quantity, brand, size, and actual cost as set forth in division (5) above. The invoices shall bear the signature of the on-sale manager or the manager’s authorized representative. One copy of the invoice shall be retained by the off-sale establishment, one copy shall be retained by the on-sale establishment, and one copy shall be filed with the Municipal Clerk. All copies shall be kept as permanent records and made available for reference and audit purposes.
(SDCL § 35-4-21)
(C) Purchase on credit. An operator may not purchase alcoholic beverages on credit.
(D) Number of operating agreements. The number of operating agreements the municipality may have is limited to the number of licenses a municipality can issue.