South Dakota has no state tax on personal income and none on corporate income, so the questions that matter there are different: sales tax, the add-on taxes cities levy, the contractor's excise tax, unemployment tax for employers, and whether you can really call South Dakota home. This page is written for tax year 2025 returns and 2026 planning.
What the lack of an income tax does and does not change
The Department of Revenue states that South Dakota is one of seven states without a state income tax, and its business tax page says there is no corporate income tax. So there is no state return for wages, capital gains, pension or IRA distributions or Social Security, and employers do not withhold state income tax. Owners of S corporations, partnerships and LLCs report pass-through income federally only; there is no state income tax for a pass-through entity election to work around.
It does not mean no tax. A South Dakota address does not shelter income earned in another state. If you moved from Illinois, Illinois can still tax Illinois-source income for the part of the year you lived there. See our Illinois page.
Sales and use tax: 4.2% now, with a date to watch
The Department's sales and use tax page lists the state rate as 4.2%. Its 2023 legislative update says the law that lowered the rate includes a sunset clause repealing the reduction effective June 30, 2027. Unless the Legislature acts, expect a change after that date and check the Department before pricing long contracts. Cities add their own tax: the Department describes municipal rates as generally between 1% and 2%, with Roslyn listed at 3%, and cities can change rates only on January 1 or July 1.
Individuals owe use tax on items bought from vendors that did not charge South Dakota tax. A seller with no physical presence becomes a remote seller when gross revenue from South Dakota sales exceeded $100,000 in the previous or current calendar year. South Dakota's remote-seller law is the one at the center of the 2018 Supreme Court decision in South Dakota v. Wayfair. See our sales tax nexus guide and sales tax service.
City, tourism and industry taxes
The municipal tax page describes a 1% municipal gross receipts tax on lodging stays under 28 consecutive days, restaurants, alcohol and admissions. Each city chooses which categories apply. People sometimes call it the bed, board and booze tax. The page also lists a 1% Sioux Falls lodging tax.
- Contractor's excise tax: 2% of gross receipts from construction work. Prime contractors cannot subtract subcontractor payments, and subcontractors avoid the tax only with a project-specific exemption certificate.
- Tourism tax: 1.5% on lodging, campgrounds, rentals, attractions and similar businesses; visitor-intensive businesses pay only June through September.
- Bank franchise tax: for financial institutions, with a $200 minimum per return.
Contractors should also read our page for construction and contractors.
Payroll and entity housekeeping
With no state withholding, payroll centers on reemployment assistance, South Dakota's unemployment insurance. The Department of Labor and Regulation handles registration, quarterly reports (due the last day of the month after each quarter) and new hire reporting. Its FAQ lists a $15,000 taxable wage base for 2015 and later, says the Legislature can change rates and bases, and assigns rates at registration. See our unemployment insurance guide.
The Department's workers' compensation page says no South Dakota law requires an employer to carry coverage and that coverage is highly recommended. Customers, lenders and other states may still require it.
Corporations and LLCs file an annual report with the Secretary of State. The fee schedule lists $55 for electronic filing and $70 for paper, plus a $55 late fee.
Property tax and proving you live there
The county director of equalization is the assessor, and the county treasurer sends the bill. A reduced owner-occupied rate applies to one property per person statewide, and the form goes to the director of equalization by March 15. Assessment freezes for the elderly and disabled are requested from the county treasurer by April 1.
South Dakota is a popular address for full-time travelers, and the Department of Public Safety publishes a separate licensing process for them. A license alone does not settle where you are domiciled for tax. Your former state can still claim you if you keep a home, family, voter registration or business there.
How we can help
We help people moving to or from South Dakota close out the old state's return and handle the final part-year filing. For businesses we review sales tax registration, municipal and tourism tax filings, contractor's excise tax and unemployment accounts, and we can respond to a state tax notice. See multi-state tax, payroll services and city and county payroll taxes.
Frequently asked questions
Does South Dakota have a state income tax?
No. The Department of Revenue says it does not impose a state income tax or a corporate income tax. You still file federal returns and may owe another state tax on income earned there.
Do I have to collect South Dakota sales tax if I sell online from another state?
You must register if your gross revenue from South Dakota sales exceeded $100,000 in the previous or current calendar year. Marketplaces that meet the test collect on sales they facilitate.
Is workers' compensation required in South Dakota?
The Department of Labor and Regulation states that no law requires any employer to carry it and recommends coverage. Contracts and out-of-state work can create their own requirements.
If I use a South Dakota address while traveling, do I owe tax to my old state?
Possibly. Domicile depends on facts such as where you keep a home, family, voter registration and business ties. If your former state still treats you as a resident, it can tax your income.
Official sources
- South Dakota Department of Revenue: Sales and use tax
- South Dakota Department of Revenue: Municipal tax
- South Dakota Department of Revenue: Individual taxes
- South Dakota Department of Labor and Regulation: Reemployment assistance FAQ for businesses
- South Dakota Secretary of State: Filing fees
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.