Yes, South Dakota does have a sales tax. The statewide rate is 4.2 percent, and cities can add up to 2 percent on top, so most purchases in populated areas carry a combined rate of 6.2 percent.1South Dakota Legislature. South Dakota Codified Laws 10-45-2 – Tax on Sale of Tangible Property What sets South Dakota apart is not the rate but the base: the state taxes nearly all services and does not exempt groceries, which makes its sales tax reach further than almost any other state’s.
The Statewide Rate and Its 2027 Sunset
The 4.2 percent state rate took effect on July 1, 2023, when House Bill 1137 cut the rate from 4.5 percent. The same bill included a sunset clause that repeals the reduction on June 30, 2027.2South Dakota Department of Revenue. 2023 Legislative Updates Unless the legislature extends it or makes the lower rate permanent, the statewide rate goes back to 4.5 percent on July 1, 2027.
Local Rates by City
South Dakota law lets cities and towns add their own sales tax of up to 2 percent.3South Dakota Department of Revenue. Municipal Tax Laws and Regulations Sioux Falls, Rapid City, Aberdeen, Brookings, Watertown, and Yankton all charge the full 2 percent, so the combined rate in those cities is 6.2 percent.4South Dakota Department of Revenue. Municipal Special Jurisdiction Tax Rate Chart Effective January 2026 Smaller communities may charge less or none at all. The Department of Revenue collects the city portion along with the state’s, so a shopper sees a single tax line on the receipt.
Extra 1 Percent on Meals, Lodging, and Alcohol
Many cities also impose a separate 1 percent Municipal Gross Receipts Tax on three categories:5South Dakota Department of Revenue. Municipal Tax Guide
- Alcoholic beverages, whether on-sale, off-sale, or at special events
- Restaurants, catering, and concession stands
- Hotels, motels, bed-and-breakfasts, and campgrounds
In a city that charges both the full 2 percent municipal tax and the 1 percent gross receipts tax, a restaurant meal or hotel room is taxed at 7.2 percent. Not every city imposes the extra 1 percent, so the total depends on where you are.
What Gets Taxed
South Dakota starts from the opposite presumption of most states: every transaction is taxable unless a specific statute exempts it.6South Dakota Department of Revenue. 7South Dakota Legislature. South Dakota Codified Laws 10-45-4 – Tax on Receipts From Business Services Most states exempt large parts of the service economy; South Dakota does not.
Groceries. Unprepared food at the grocery store is taxed at the full 4.2 percent state rate plus any local tax. The only purchases that come out untaxed are those made with SNAP benefits or WIC vouchers.8South Dakota Department of Revenue. Sales and Use Tax Guide
Digital products and admissions. Downloaded or streamed music, movies, books, and software are taxed the same as physical goods.9South Dakota Department of Revenue. Products Transferred Electronically Movie tickets, sporting event admissions, and state park entries are taxable too.
What’s Exempt
Several categories do escape the tax.
Professional health services from physicians, surgeons, dentists, chiropractors, podiatrists, physical therapists, and other practitioners of the healing arts are exempt.10South Dakota Legislature. South Dakota Codified Laws Title 10 Chapter 45 – Section 10-45-12.1 If the same provider sells you a physical product, like a dentist selling a toothbrush, that sale is taxable.11South Dakota Legislature. Administrative Rule 64:06:02 – Section: Dentists and Dental Laboratories
Prescription drugs for human use are exempt when prescribed, dispensed, or administered by a licensed provider, along with non-prescription insulin, prescription durable medical equipment, mobility-enhancing equipment, and prosthetic devices.12South Dakota Legislature. South Dakota Codified Laws 10-45-14.10
Farming gets targeted relief. Commercial fertilizer in quantities of 500 pounds or more, registered pesticides, and seed sold in quantities of 25 pounds or more are exempt when used for agriculture.13South Dakota Department of Revenue. Agricultural Products Soil preparation, planting, cultivating, and harvesting services are also exempt.14South Dakota Department of Revenue. Agricultural Services
Sales to federal, state, and local government agencies are generally exempt, and qualifying nonprofits can apply to the Department of Revenue for exempt status.15South Dakota Department of Revenue. Sales and Use Tax
Online Purchases and Use Tax
Out-of-state retailers must register and collect South Dakota sales tax once their gross revenue from sales into the state tops $100,000 in the previous or current calendar year.15South Dakota Department of Revenue. Sales and Use Tax This economic nexus rule came out of the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair, and it covers tangible goods, electronically delivered products, and services shipped into the state.
If you buy something from a seller that doesn’t charge South Dakota tax, you still owe use tax at the same combined state and local rate that would have applied if you’d bought it in your home city.16South Dakota Legislature. South Dakota Codified Laws 10-46-2 – Tax on Tangible Personal Property Purchased for Use in State The reporting obligation falls on you as the buyer, and unreported use tax can be picked up in an audit along with penalties and interest.
Construction Is Taxed Differently
If you’re hiring a contractor for a home remodel or new build, that work isn’t on the sales tax. South Dakota applies a separate 2 percent contractor’s excise tax to the gross receipts of prime contractors doing construction or realty improvement, covering new construction, remodeling, and repair of real property, from flooring installation to a furnace motor replacement.17South Dakota Legislature. South Dakota Codified Laws 10-46A-1 – Tax Imposed on Prime Contractors Receipts From Realty Improvement Contracts18South Dakota Department of Revenue. Contractors Excise Tax The contractor remits the tax, and the cost is usually baked into the bid.