Navigating South Dakota's regulatory landscape poses unique challenges due to its multilayered approach to short-term rental oversight. The state has minimal regulations targeting short-term rentals, but it requires sales tax and lodging licenses, and municipalities can implement their own ordinances, creating a patchwork of varying requirements.
This guide covers short-term rental laws in South Dakota, including licensing, tax requirements, and regulations in major cities.
Understanding South Dakota Short-Term Rental Laws
South Dakota takes a hands-off approach to short-term rental regulation at the state level, focusing on taxation and basic lodging standards rather than imposing operational restrictions. The state grants municipalities the authority to regulate short-term rentals through local ordinances, creating a diverse regulatory landscape where rules vary significantly between jurisdictions.
The variation between cities and counties isn't merely administrative; it determines whether a property can legally operate as a short-term rental, and under what conditions. Some South Dakota communities welcome vacation rentals with minimal restrictions, while others have implemented regulations on permitting, operational standards, and more.
This multilayered regulatory approach reflects South Dakota's tradition of local governance. This allows communities to tailor regulations to their needs, property owners must navigate different requirements based on location. A rental property management strategy that works in one South Dakota city might face different requirements in a neighboring community.
The regulatory landscape has become dynamic in recent years. As short-term rentals grow in popularity, especially in tourist areas like the Black Hills, more South Dakota communities are developing regulations to address potential impacts on housing availability, neighborhood character, and local services. Regulations existing when you purchased a property may change, affecting your operational model and return on investment.
For property owners and investors, this evolving landscape makes thorough research and ongoing monitoring of local regulations essential. Understanding the specific rules for your property's location is the foundation of legal compliance and successful operation in South Dakota's short-term rental market.
Definition of a Short-Term Rental
South Dakota defines short-term rentals for tax purposes as accommodations for less than 28 consecutive days. This timeframe determines which rentals are subject to state sales tax, tourism tax, and other applicable taxes.
Local definitions may vary. Sioux Falls defines a short-term rental as "a dwelling rented to the public on a daily or weekly basis for more than 14 days in a calendar year and not occupied by the owner/manager during the rental period." This definition distinguishes short-term rentals from owner-occupied properties and establishes a threshold for regulations.
Properties suitable for short-term rentals include:
- Single-family homes
- Condos and apartments
- Cabins and vacation homes
- Townhouses and duplexes
- Individual rooms within a dwelling
Traditional accommodations like hotels, motels, and bed and breakfasts generally fall under separate regulatory frameworks with specific licensing and operational requirements. In some cities, like Rapid City, regulations differentiate between "Bed and Breakfast" (where the operator is on-site) and "Vacation Homes" (where no operator is on-site).
Some South Dakota municipalities may further refine these definitions. For example, Sioux Falls exempts properties rented for 14 days or fewer annually from its permitting requirements, and Rapid City has similar exemptions.
Understanding the specific definition in your jurisdiction is crucial, as it determines the regulations governing your property and the requirements for legal operation. You require need to consult local planning departments or municipal authorities to understand your property classification under local ordinances.
Starting a Short-Term Rental Business in South Dakota
Launching a short-term rental business in South Dakota requires careful navigation of state and local regulations, which vary by location. Success depends on thorough research and adherence to evolving rules as communities refine their approach to vacation rentals.
1. Research local regulations
Before purchasing a property or converting an existing one to a short-term rental, investigate the regulations in your city or county. South Dakota's approach means requirements can vary significantly across communities.
This preliminary research is crucial in South Dakota, where Sioux Falls and Rapid City have implemented specific regulations for short-term rentals. Sioux Falls requires a residential rental permit for all short-term rentals, while Rapid City requires a short-term rental permit for properties rented more than 14 days per year.
Start your research with your local government website, focusing on planning departments, zoning offices, and business licensing. Look for ordinances on short-term or vacation rentals in municipal codes related to housing, business licensing, or zoning.
2. Obtain State Licenses
South Dakota doesn’t have a specific licensing system for short-term rentals, but two state-level licenses are required:
- State Sales Tax License: All short-term rental operators in South Dakota must register with the Department of Revenue to collect and remit state sales tax, tourism tax, and local taxes.
- Lodging License: The South Dakota Department of Health requires a lodging license for short-term rental properties to ensure compliance with health and safety standards.
State licenses are prerequisites for local permits or registrations and must be obtained before starting operations.
3. Secure Local Permits
Many South Dakota cities require specific permits for short-term rentals:
- Sioux Falls requires a Residential Rental Permit for all short-term rentals operating over 14 days per year.
- Rapid City requires a Short-Term Rental Permit for rentals over 14 days/year.
- Other cities have their own permitting or registration requirements.
Application processes vary by location, with some areas offering online systems and others requiring in-person submissions and potential inspections. Processing times range from a few days to several weeks, making advance planning essential, especially for peak tourism seasons.
4. Understand Zoning Restrictions
Zoning regulations could hinder operating a short-term rental in South Dakota. Many cities and counties restrict short-term rentals to specific zoning districts or impose conditions in residential zones.
Before purchasing or converting a property, verify that short-term rentals are permitted in your zone and if there are additional criteria, such as parking, occupancy, or property type restrictions. This information is typically available through city or county planning departments or zoning offices.
5. Comply with Safety Standards
Safety requirements for South Dakota short-term rentals typically include:
- Working smoke detectors
- Carbon monoxide alarms
- Fire extinguishers
- Emergency exit plans
- Compliance with building codes
- Proper electrical and plumbing systems
- Adequate sanitation facilities
The state lodging license requires compliance with basic health and safety standards. Local permit applications include inspection requirements to verify safety compliance.
6. Register for Tax Collection
Short-term rental operators in South Dakota have tax obligations that include:
- State sales and use tax of 4.5% (for reservations shorter than 28 nights)
- 1.5% tourism tax
- Municipal city taxes (1-2% depending on location)
- Specialized taxes in certain areas (e.g., Sioux Falls has a $2 per room BID fee)
Platforms like Airbnb and Vrbo collect and remit some taxes for South Dakota bookings, but operators are ultimately responsible for fulfilling all tax obligations.
Clear record-keeping is essential for accurate tax reporting, including documentation of rental income, occupancy periods, and collected taxes. Many professional hosts use specialized software to track these obligations and ensure compliance with varying requirements.
7. Secure Insurance
Standard homeowners insurance typically doesn't cover commercial short-term rental activities, creating a potential coverage gap for unprepared operators. Adequate insurance for South Dakota short-term rentals includes:
- Property coverage for the dwelling and contents
- Liability protection for guest injuries
- Business interruption coverage
- Coverage for theft or damage caused by guests
Some South Dakota municipalities require proof of insurance for the permit application.
Many major insurers now offer specialized short-term rental policies or endorsements to standard homeowners policies. Platforms like Airbnb and Vrbo provide limited host protection programs, but these have significant limitations and exclusions, making dedicated insurance advisable.
8. Establish Local Management
Some South Dakota cities require short-term rental operators to designate a local contact person to address issues promptly. This is important for out-of-state owners who cannot address emergencies or complaints personally.
Sioux Falls requires a local contact if the owner lives more than 50 miles from the rental property. This representative must be available to respond to issues promptly, have access to the property, and be authorized to address problems.
Non-local owners need to hire a professional property manager or establish a relationship with a reliable local contact. The contact information must be provided to the permitting authority and sometimes to guests and neighboring properties.
Licensing Requirements
South Dakota lacks a statewide short-term rental licensing system, but requires two key state licenses: a sales tax license from the Department of Revenue and a lodging license from the Department of Health. Beyond these state requirements, local licensing and permitting vary across jurisdictions.
State Licenses
All short-term rental operators must register with the South Dakota Department of Revenue to collect and remit state sales tax, tourism tax, and local taxes.
The South Dakota Department of Health requires a lodging license for short-term rental properties to ensure compliance with health and safety standards.
Local City Licensing
Sioux Falls
Sioux Falls' requirements include:
- Residential Rental Permit required for short-term rentals operating over 14 days/year.
- Completion of a 2-hour training.
- Proof of state sales tax and lodging licenses.
- $50 permit fee (after July 1, 2024)
- Occupancy limit: 3 people per bedroom.
- 1 parking space per bedroom requirement
- Local contact person if the owner lives more than 50 miles from the property.
Rapid City
Rapid City requires:
- Short-Term Rental Permit for rentals operating over 14 days/year
- Proof of state licenses (Health and Revenue Departments)
- Compliance with zoning codes for eligible properties
- Note: Regulations are under development, including additional requirements for zoning districts, registration, parking enforcement, and occupant limits.
Aberdeen and Brookings
Short-term rental regulations for Aberdeen and Brookings are limited. However, these cities require:
- Compliance with state licensing requirements (sales tax and lodging licenses)
- Adherence to zoning regulations
- Potential local permitting or registration requirements, though specific details are unavailable
Application processes typically involve submitting detailed information about the property and owner, including:
- Property address and specifications
- Owner identification and contact information
- Floor plans (often required for state lodging license)
- Local contact details where required
- State license proof
- Proof of insurance (where required)
- Certification of compliance with safety standards
License and permit fees vary by jurisdiction and are set by local authorities. Sioux Falls charges a $50 permit fee per address (effective July 1, 2024).
Local licenses and permits typically have defined validity periods requiring annual renewal. The process involves confirming compliance with regulations, updating property information if needed, and paying fees.
License Renewals
Maintaining valid licenses and permits for South Dakota short-term rentals requires attention to renewal processes and deadlines at state and local levels.
State license renewal requirements include:
- Sales tax license renewal required by the South Dakota Department of Revenue.
- Lodging license renewal required by the South Dakota Department of Health.
Local permit renewal requirements vary by jurisdiction:
- Renewal frequency and deadlines are set by the licensing authority (city or county).
- Local jurisdictions define specific processes.
The renewal process involves:
- Submitting a renewal application before the expiration date.
- Paying renewal fees
- Providing updated documentation, such as proof of continued insurance coverage and regulatory compliance.
- Confirming continued compliance with regulations
- In some cases, undergoing re-inspection to verify ongoing safety compliance.
Property owners and managers must track renewal deadlines, as operating with expired licenses or permits can result in penalties. Many jurisdictions impose fines for continued operation without valid authorizations, and some implement additional penalties for repeat violations, including potential permit revocation.
Most authorities send renewal notices as a courtesy, but the responsibility for timely renewal rests with the property owner. Changes in contact information or mail delivery issues could result in missed notifications, making proactive tracking of renewal deadlines essential.
Failing to renew required licenses and permits can result in penalties, fines, and the inability to legally operate a short-term rental,disrupting your business operations and revenue stream.
Required Documents
Operating a short-term rental in South Dakota requires maintaining various documents to demonstrate compliance with state and local regulations. These materials support the initial license application, facilitate ongoing operations, and may be requested during inspections or complaints.
Essential documentation includes:
- Proof of property ownership (deed, mortgage statement) establishes your legal right to operate a short-term rental at the location and is required for state and local permits.
- Property information, including address and floor plans, is often needed for the state lodging license and local permits to determine occupancy limits and ensure guest accommodation standards.
- Owner and operator information, including IDs and contact details, ensures authorities can reach the responsible party. Local contact information is needed if the owner is remote (e.g., Sioux Falls requires this if the owner is over 50 miles away).
- Proof of insurance coverage for short-term rentals. While not all South Dakota municipalities require specific insurance documentation, having appropriate coverage is essential for protecting your investment.
- State sales tax and health department lodging licenses are prerequisites for local permits and must be maintained throughout operation.
- Tax identification numbers (EIN or SSN)purposes and for proper tax reporting, collection, and remittance.
- Training certificate (if required). For example, Sioux Falls requires a 2-hour training program for short-term rental operators.
Beyond these regulatory documents, responsible operators maintain additional records to support their business operations, including:
- Guest agreements and house rules
- Cleaning and maintenance logs
- Tax payment records and receipts
- Communications with local authorities or neighbors.
Organizing these materials in physical and digital formats ensures quick access. Many professional hosts create comprehensive digital filing systems with backup copies of critical documents, protecting against loss and enabling remote access.
Short-Term Rental Taxes
South Dakota imposes significant tax obligations on short-term rental operators at both state and local levels. Understanding and fulfilling these tax responsibilities is essential for legal compliance and financial management of vacation rental properties.
State Sales and Tourism Taxes
South Dakota requires short-term rental operators to collect and remit the following taxes on reservations shorter than 28 nights:
- State sales and use tax is 4.5%.
- 1.5% tourism tax
All short-term rental operators must register with the South Dakota Department of Revenue to collect and remit these taxes. This registration is mandatory even if a booking platform collects and remits the tax on your behalf, as you remain responsible for tax compliance.
Operators must regularly file tax returns with the South Dakota Department of Revenue, even if no tax is due. Electronic filing is encouraged to streamline the process and ensure timely compliance.
Municipal and Special District Taxes
Many South Dakota municipalities impose additional taxes on short-term rentals:
- Municipal city taxes (1-2%)
- Sioux Falls has a 1% room occupancy tax and a 1% municipal gross receipts tax.
- Some areas have special district taxes (e.g., Sioux Falls has a $2 per room BID fee).
Operators should verify local tax rates with the city or county tax authority where their property is located.
Tax Collection by Platforms
Major booking platforms like Airbnb and Vrbo collect and remit some taxes on behalf of hosts in South Dakota, but operators remain responsible for ensuring all tax obligations are fulfilled. This is crucial for bookings made through other channels or platforms that don't collect taxes automatically and for any taxes the platforms don't collect.
Understand which taxes platforms collect and which ones you need to collect from guests.
Income Taxes
Rental income from short-term rentals in South Dakota is subject to federal income tax. South Dakota does not have a state income tax, which is a significant advantage for property owners.
Short-term rental operators can reduce their tax burden through various business-related deductions, including:
- Property depreciation
- Mortgage interest
- Property taxes
- Utilities and internet
- Cleaning and maintenance costs
- Furnishings and supplies
- Platform commission fees
- Marketing expenses
- Professional service fees
Proper record-keeping is essential for maximizing deductions and maintaining tax compliance. Many professional hosts work with accountants specializing in short-term rentals to optimize their tax strategy and ensure accurate reporting.
Statewide Rules
South Dakota lacks comprehensive statewide legislation for short-term rental platforms like Airbnb or VRBO. The state's approach focuses on taxation and basic lodging standards rather than operational restrictions.
South Dakota state law focuses on:
- Tax Framework: The state requires collection of sales tax (4.5%) and tourism tax (1.5%) on short-term accommodations rented for less than 28 days.
- Lodging Standards: Through the Department of Health's lodging license requirement, the state ensures rental properties meet basic health and safety standards.
- Local Authority: South Dakota enables local control over short-term rentals, allowing cities and counties to establish their own requirements through ordinances.
- General Business Regulations: Short-term rental operators must comply with standard business registration requirements if operating as a formal business entity rather than as an individual.
There is no state-level preemption preventing local jurisdictions from creating and enforcing their own short-term rental regulations. This means cities and counties have broad discretion to establish their own requirements, restrictions, and operational standards.
This minimal state framework means the regulatory landscape is defined locally, with municipalities exercising significant authority to establish their own requirements, restrictions, and operational standards.
For property owners and investors, this state-level approach creates opportunities and challenges. The absence of uniform statewide restrictions allows operation in areas with minimal local regulation, but it creates a patchwork of requirements across jurisdictions that requires careful navigation.
Currently, there’s no indication that South Dakota plans to implement comprehensive statewide short-term rental legislation soon, making it likely that the current approach will continue.
Short-Term Rental Laws by City
South Dakota's cities have distinct approaches to short-term rental regulation, reflecting their unique housing markets, tourism patterns, and community priorities. Understanding these regulations is essential for successful operation in different markets across the state.
1. Sioux Falls Short-term Rental Laws
As South Dakota's largest city, Sioux Falls has established regulations for short-term rentals.
Overview: Sioux Falls defines a short-term rental as "a dwelling rented to the public on a daily or weekly basis for over 14 days a year and not occupied by the owner/manager during the rental period."
Key Regulations:
- Residential Rental Permit required for short-term rentals operating over 14 days per year.
- Applicants must complete a 2-hour training.
- Proof of state sales tax and lodging licenses required.
- $50 permit fee (after July 1, 2024)
- Occupancy limit of 3 people per bedroom.
- 1 parking space per bedroom requirement
- Local contact needed if the owner lives over 50 miles from the property.
- Guests must be courteous to neighbors.
- Permits can be revoked for violations.
Tax Rates:
- State Sales Tax (4.5%)
- Tourism Tax (1.5%)
- Municipal Gross Receipts Tax (1%)
- Sioux Falls Lodging Tax (1%)
- $2 per room BID fee (in applicable areas)
2. Rapid City Short-term Rental Laws
As a major tourist destination near Mount Rushmore, Rapid City has established regulations for short-term rentals.
Overview: While the exact definition isn't detailed, Rapid City differentiates between "Bed and Breakfast" (operator on-site) and "Vacation Home" (no operator on-site) and exempts rentals operating 14 days or fewer annually.
Key Regulations:
- Short-Term Rental Permit required for rentals over 14 days/year.
- Need proof of state licenses (Health and Revenue Departments).
- Application, documentation, and potential inspection are part of the process.
- Zoning codes dictate eligible properties for short-term rentals.
- Regulations are in development, including zoning districts, registration, parking enforcements, and occupant limits.
- Public input on regulations was sought in early 2025.
Tax Rates:
- State Sales Tax (4.5%)
- Tourism Tax (1.5%)
- Municipal City Tax (1-2%, rates need verification)
3. Aberdeen Short-term Rental Laws
Information on Aberdeen's short-term rental regulations is limited.
Overview: No specific city definition was found. Zoning for "Boarding House" exists, excluding transient use, suggesting regulations for short-term rentals.
Key Regulations:
- Requires state lodging and sales tax licenses.
- City-specific permit requirements not detailed in available sources.
- Zoning regulations exist, but specific short-term rental zoning details are not available.
- General neighborhood considerations and safety standards apply.
Tax Rates:
- State Sales Tax (4.5%)
- Tourism Tax (1.5%)
- Municipal City Tax (1-2%, verify rates)
4. Brookings Short-term Rental Laws
Information on Brookings' short-term rental regulations is limited.
Overview: No specific city definition was found. General short-term rental definitions apply.
Key Regulations:
- Requires state lodging and sales tax licenses.
- City-specific permit requirements not detailed in available sources.
- Zoning regulations exist, but specific short-term rental zoning details aren’t readily available.
- General neighborhood considerations and safety standards apply.
Tax Rates:
- State Sales Tax (4.5%)
- Tourism Tax (1.5%)
- Municipal City Tax (1-2%, verify rates)
Bottom Line
Operating a short-term rental in South Dakota requires navigating the state's regulatory landscape. With state-level sales tax and lodging license requirements, combined with varying local regulations, property owners must take a location-specific approach to compliance and planning.
Before investing in a short-term rental property in South Dakota:
- Research thoroughly - Understand state and local requirements, including permitting, zoning, and operational standards. This research should be location-specific and consult city or county planning departments, tax offices, andlegal advisors familiar with the jurisdiction.
- Consider location carefully - Local regulations may make some areas significantly more favorable for short-term rental investments than others. Cities like Sioux Falls have specific requirements, while others may have more flexible approaches or developing regulatory frameworks.
- Budget for compliance costs - Include state license fees, local permit fees, insurance requirements, and ongoing operational expenses related to regulatory compliance. These costs in South Dakota tend to be modest compared to other states, but they should be incorporated into your financial planning.
- Implement professional management practices - Professional standards for guest screening, property maintenance, noise management, and neighbor relations prevent problems and support your business’s sustainability.
- Stay informed about regulatory changes - South Dakota's short-term rental regulations are evolving locally, with cities like Rapid City developing their approaches. Monitoring local government communications and participating in local host associations can help you stay ahead.
The short-term rental landscape in South Dakota presents opportunities and challenges. By understanding and adhering to state and local regulations, operators can build successful businesses that contribute positively to South Dakota's tourism and housing economy while maintaining good relationships with local communities and authorities. Proper compliance avoids penalties and supports the long-term viability of your vacation rental investment in the Mount Rushmore State.
