South Dakota Tax Calculator 2026

South Dakota: No Income Tax State

South Dakota is one of only seven US states that levy no state personal income tax. The state also has no corporate income tax, no personal property tax, no business inventory tax, and no inheritance tax. This combination makes South Dakota one of the most tax-friendly states in the entire country, consistently ranking in the top 5 on the Tax Foundation's State Business Tax Climate Index.

South Dakota's no-income-tax status is not a recent development. The state has never had a personal income tax in its history, dating back to statehood in 1889. Voters rejected a proposed income tax in 1972, and the political culture strongly favors maintaining this status. South Dakota's constitution does not explicitly prohibit an income tax, but the political reality makes its adoption extremely unlikely.

How South Dakota Funds Government

Without an income tax, South Dakota relies on alternative revenue sources:

• Sales Tax (largest source) — 4.2% state rate plus local additions (avg ~6.4% combined). Accounts for about 40% of state general fund revenue.
• Property Tax — Approximately 1.01% effective rate. Primarily funds schools and local government.
• Excise Taxes — Taxes on fuel, tobacco, alcohol, and cannabis.
• Tourism Revenue — Mount Rushmore and other attractions generate significant economic activity.
• Gaming Taxes — Deadwood casinos and tribal gaming contribute tax revenue.
• Trust Industry Fees — The growing trust and financial services industry generates licensing fees and economic activity.
• Federal Funds — South Dakota receives substantial federal aid for highways, agriculture, and social programs.

South Dakota Sales Tax

South Dakota's state sales tax rate is 4.2%. Municipalities can add their own local sales taxes, with most cities adding between 1% and 2%. The average combined state and local rate is approximately 6.4%. Sioux Falls, the state's largest city, has a combined rate of approximately 6.2%.

Key Sales Tax Details

• Groceries — Taxed at the full rate (South Dakota is one of only a few states that taxes groceries at the full sales tax rate)
• Sales Tax Refund — Low-income residents can apply for a sales tax refund of up to $127.50 to offset the grocery tax burden
• Online sales — South Dakota was the named plaintiff in the landmark South Dakota v. Wayfair (2018) Supreme Court case that allowed states to require online retailers to collect sales tax
• Tourism taxes — Hotels and campgrounds are subject to additional tourism taxes in certain areas

South Dakota Property Tax

South Dakota's effective property tax rate is approximately 1.01%, which is very close to the national average. Property taxes are assessed at the county level and fund local government services, schools, and special districts. The state offers several programs to reduce property tax burdens:

• Sales Tax on Food Refund — Annual refund available for elderly and disabled homeowners
• Property Tax Reduction — Available for homeowners 65+ with income below certain thresholds
• Disabled Veteran Exemption — Full or partial property tax exemption for qualifying disabled veterans
• Assessment Freeze — Available for certain elderly homeowners to freeze assessed value

South Dakota: America's Trust Haven

South Dakota has emerged as the premier domestic trust jurisdiction in the United States, attracting hundreds of billions of dollars in trust assets from around the world. Several features make the state uniquely attractive for trust planning:

• No income tax on trust income — Trusts sitused in South Dakota pay zero state income tax on accumulated income, dividends, and capital gains. This alone can save trust beneficiaries millions over time compared to high-tax states.
• Dynasty trusts — South Dakota abolished the rule against perpetuities, allowing trusts to last forever. This enables multi-generational wealth transfer without estate taxes at each generation.
• Asset protection — The state allows domestic asset protection trusts (DAPTs) with only a two-year statute of limitations for fraudulent transfer claims, among the shortest in the nation.
• Directed trusts — South Dakota was a pioneer in directed trust statutes, allowing trust functions to be divided among multiple parties (trustee, investment adviser, distribution adviser) for maximum flexibility.
• Privacy — South Dakota trust law provides strong privacy protections, with no requirement to file trust documents in public records.
• No rule against accumulations — Trust income can be accumulated indefinitely without forced distributions.

The Pandora Papers investigation in 2021 highlighted South Dakota's role as a global trust destination, revealing that numerous wealthy families and foreign nationals had established trusts in the state. While this brought scrutiny, South Dakota has maintained its favorable trust laws and continues to attract trust companies and high-net-worth individuals.

South Dakota vs. Neighboring States

• Wyoming — Also no income tax, 4% sales tax + local (~5.36%), 0.55% property tax. Wyoming has lower sales and property taxes, but South Dakota has a larger trust industry and more urban amenities.
• North Dakota — 0%-2.5% income tax (very low), 5% sales tax + local, 0.94% property tax. North Dakota has a minimal income tax but still imposes one, unlike South Dakota.
• Minnesota — 5.35%-9.85% income tax (high), 6.875% sales tax + local, 1.02% property tax. Minnesota is one of the highest-tax states, making South Dakota an attractive option for Minnesota residents.
• Nebraska — 2.46%-5.84% income tax, 5.5% sales tax + local, 1.54% property tax. Nebraska has significantly higher taxes across all categories.
• Iowa — 4.4%-5.7% income tax, 6% sales tax + local, 1.43% property tax. Iowa's tax burden is substantially higher than South Dakota's.
• Montana — 4.7%-5.9% income tax (recently reformed), no sales tax, 0.74% property tax. Montana trades no sales tax for a significant income tax.

Use our state comparison calculator to see how much you could save in South Dakota.