South Dakota does not levy a state income tax on individual wages, salary, or investment income. This prohibition has been in the state constitution since 1943.
Tax Overview
South Dakota has constitutionally prohibited a state income tax since 1943. The state also has no corporate income tax, no personal property tax, and no business inventory tax. Revenue is generated primarily through sales taxes, property taxes, and excise taxes. South Dakota is widely recognized as one of the most tax-friendly states in the nation, with one of the lowest overall tax burdens.
Other Taxes in South Dakota
4.2% state sales tax rate, with municipal additions bringing the combined rate up to approximately 6.5%. Groceries are taxed at the full rate in South Dakota.
Local governments levy property taxes on real property. South Dakota's effective property tax rates are near the national average, with a homestead exemption available for owner-occupied homes.
Excise taxes on motor fuel, tobacco, and alcoholic beverages. South Dakota also levies a use tax on items purchased out of state for use within the state.
A franchise tax on banks and financial institutions based on their net income, in lieu of other business taxes.
Federal Taxes Still Apply
While South Dakota does not levy a state income tax, residents are still subject to federal income tax, FICA taxes (Social Security and Medicare), and self-employment tax. Use our Federal Income Tax Calculator to estimate your federal tax liability.