Does South Dakota have a state income tax? No. Here is what South Dakotans pay instead

No. The Department of Revenue says South Dakota does not impose a state income tax, and the state has no corporate income tax either (banks pay a franchise tax instead). Wages, Social Security, pensions, investment income and capital gains are not taxed by the state, and employers withhold only federal tax.

Unlike some states, South Dakota’s constitution does not ban an income tax; it expressly lets the Legislature tax incomes. But any new tax needs a two-thirds vote of each house or a voter initiative, and voters rejected income tax measures in 1970 and 1992. No income tax bill was filed in 2025 or 2026, and the November 3, 2026 ballot has no tax measure.

A 2023 law cut the state sales and use tax from 4.5% to 4.2% until 2027. Bills to keep the lower rate failed in 2025 and in 2026 (on a 17–17 Senate vote), so under current law the rate returns to 4.5% on July 1, 2027, and a 2026 law (SB 245) sends that extra 0.3% to lower homeowners’ property taxes. The 2027 Legislature could still change this.

Cities can add up to 2% general sales tax plus a 1% gross receipts tax on restaurants, lodging, alcohol and admissions, and a 1.5% state tourism tax applies to some lodging, amusements and short-term vehicle rentals. From January 1, 2027, counties can also add up to 0.5%, with the money going to a property tax credit for owner-occupied homes. Groceries are taxed in South Dakota; only SNAP purchases are exempt, and a 2024 ballot measure to end the food tax failed.

Property tax is entirely local. Property is assessed at market value and then equalized to 85%, and an owner-occupied home qualifies for a lower rate if you file the owner-occupied certification with the county director of equalization by March 15. You can claim only one owner-occupied home in the state.

A few other taxes reach households directly.

South Dakota issues driver’s licenses to people who live full time in an RV or travel full time for work. First-time applicants apply in person with a receipt from a South Dakota hotel, campground or RV park showing at least one night’s stay in the past year, a document showing their personal mailbox (PMB) address, and a notarized residency affidavit swearing that South Dakota is their home and that they keep no residence in any other state. You must give up your other state’s license, and the affidavit warns that you will be called for South Dakota jury duty.

Voting is stricter. Since 2025 a voter must have lived at a fixed dwelling in South Dakota for at least 30 consecutive days, and someone registering with only a mail-forwarding address can vote only in federal races.

Your former state decides whether you have left, under its own domicile rules, and a driver’s license is only one factor. Illinois says you lose Illinois domicile only by settling elsewhere intending to make it your home and abandoning any intention of returning, and it presumes that someone still taking a homestead exemption on Illinois property is a resident. Minnesota says domicile continues until you act to change it, with no single deciding factor, and California says it is the strength of your ties, not just the number, that decides.

Wages earned in another state are generally taxed by that state wherever you live, and rental income or gains from property elsewhere stay taxable where the property is.

South Dakota employers withhold only federal taxes. They pay state unemployment (reemployment assistance) tax on the first $15,000 of each employee’s wages for 2025 and 2026. A new employer pays 1.2% plus a 0.55% investment fee in the first year (6% plus 0.55% in construction).

South Dakota residents file a federal Form 1040 when their income requires it. There is no state refund to track, so use the IRS “Where’s My Refund?” tool, which shows a status about 24 hours after you e-file or four weeks after you mail a paper return.