South Dakota vacation rental tax guide

With a bounty of popular destinations including Rapid City, Deadwood, and Sturgis, the Mount Rushmore State offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STRs in South Dakota are subject to lodging taxes. Failure to comply with state and local tax laws can result in fines and interest penalties. Tax jurisdictions are increasingly making STR tax compliance a priority, so it’s important to address compliance before tax authorities address it for you.

Avalara MyLodgeTax put together this guide to help you comply with South Dakota lodging tax laws at the state level. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.

No lodging tax guide is a substitute for professional tax advice. Consider this an asset to help you understand and prioritize your lodging tax questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with South Dakota tax laws.

Lodging tax basics

Lodging tax is calculated as a percentage of the cost of your guest’s stay and added to the price on the bill. The guest pays the tax, but the STR operator is responsible for collecting the tax and paying it to the proper tax authority.

What’s the definition of “short-term rental” in South Dakota?

Reservations of sleeping accommodations for less than 28 days are subject to South Dakota lodging taxes. STRs that operate for 10 or fewer days in a calendar year are not subject to lodging taxes.

Who’s required to collect and file taxes on short-term rentals in South Dakota?

If you collect payment from short-term guests renting out a room, apartment, house, or other dwelling for more than 10 days per year, you’re likely responsible for collecting, filing, and remitting lodging taxes to South Dakota tax authorities.

Location is key to compliance

The location of your rental is a crucial piece of information for lodging tax compliance. Your address determines which tax jurisdictions you’re required to report to, which taxes you need to collect, and the appropriate tax rates.

Use our lodging tax lookup tool to get a rate report specific to your South Dakota rental’s address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, and minimum number of rented days to qualify as a taxable stay. Tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.

Local short-term rental regulations

STR operators in South Dakota should be aware of the local regulations that apply to them, including rules covering:

• Legality
• Permits, licenses, and registration
• Zoning
• Advertising
• Neighborhood notification
• Building and housing standards

Homeowner associations (HOAs), condominium communities, co-ops, and landlords may also have specific rules regarding vacation rentals. It’s your responsibility to be aware of STR policies that apply to your property.

Registering with tax authorities

Businesses with a physical presence in South Dakota are required to register with the South Dakota Department of Revenue. You can register online for a sales tax license.

Collecting lodging taxes

Once you’ve registered with tax authorities, you’re ready to start collecting lodging taxes, which you’ll add to your guest’s bill when they pay for their stay.

Which lodging taxes apply to South Dakota short-term rentals?

In South Dakota, a number of different lodging taxes may apply to your STR, depending on your location. These can include:

Tax rates

Before you can begin collecting lodging taxes, you need to know the correct rate to charge to avoid compliance issues. Our lodging tax lookup tool can give you a rate report specific to your South Dakota address.

What charges are taxable?

In South Dakota, all charges that are part of the price for accommodations are taxable. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, cancellation fees, and no-show fees. Fees that are refundable, such as damage deposits, are also subject to taxes; when the deposit is refunded, the tax is refunded as well. Some optional fees are subject to sales tax, but not subject to municipal gross receipts tax or tourism tax.

What happens when my short-term rental marketplace (such as Airbnb or Vrbo) collects lodging taxes for me?

STR marketplaces are required to collect and pay lodging taxes for all transactions within South Dakota. STR operators aren’t responsible for lodging tax remittance on sales that go through a marketplace. If taxes aren’t being collected for you, you’re responsible for collecting and remitting them to state tax authorities.

Are guests ever exempt from lodging taxes?

There are situations in which you aren’t required to collect lodging taxes in South Dakota. For example, a guest who rents for a long term rather than a short term is exempt from lodging taxes.

In South Dakota, purchases of accommodations by organizations including Indian tribes, U.S. government agencies, South Dakota government agencies, South Dakota public or municipal corporations, volunteer fire or ambulance departments, public schools, religious or private schools, nonprofit hospitals or relief agencies, governments from other states or the District of Columbia that provide a similar exemption for South Dakota governments, governments of states without a sales tax, and foreign diplomats and consular personnel are exempt from South Dakota lodging taxes. Organizations must present exemption certificates and purchases must be paid for directly with organization funds.

Filing lodging tax returns

After you’ve collected taxes from your guests, it’s time to file your tax returns with the South Dakota Department of Revenue. In South Dakota, you can file returns and pay tax online or manually. The South Dakota Department of Revenue allows credit card payments, but you may be charged convenience fees for this type of payment.

When do I need to file my returns?

You’ll be assigned a filing frequency and due dates when you register with the tax authority. For filing with the South Dakota Department of Revenue, due dates are as follows:

I didn’t rent my property during this filing period. Am I still required to file a lodging tax return with the South Dakota Department of Revenue?

Yes. STR operators registered with the South Dakota Department of Revenue are required to file returns each assigned filing period, regardless of whether you had any STR income or collected lodging taxes. Such returns are commonly known as “zero dollar returns.”

Are there penalties for filing taxes late?

Whether you choose to offer STRs through a marketplace like Airbnb or Vrbo, or directly to guests, you open the door to tax liability at the state and local level. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses violating tax laws. Failure to register with tax authorities and file lodging tax returns in South Dakota on time may result in late fees, interest payments, and in extreme cases, legal action.

I’ve been offering short-term rentals without collecting lodging tax. What options do I have?

If you’re already operating an STR but not collecting lodging taxes, you may be in violation of South Dakota tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risks.

STR hosts in South Dakota may be able to take advantage of a voluntary disclosure agreement (VDA). A VDA offers an opportunity for hosts to proactively disclose prior period tax liabilities in accordance with a binding agreement with the South Dakota Department of Revenue. VDAs are offered to encourage cooperation with state tax laws and may result in some or all penalty and interest payments being waived.

Are there options for outsourcing lodging tax filing?

Yes. Many STR operators in South Dakota file several state and local lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.