What are Short-Term Rental (Airbnb, VRBO) Regulations in South Dakota?

Short-term rental regulations in South Dakota play a crucial role in shaping the landscape of the hospitality industry within the state. These regulations are carefully crafted to ensure that short-term rental businesses operate within the confines of the law and in harmony with the community.

Understanding and complying with these regulations is essential for individuals looking to venture into the realm of short-term rentals in South Dakota. While the state does not have uniform laws specifically targeting platforms like Airbnb or VRBO, owners of short-term rentals may still have state sales tax obligations.

Cities and counties across South Dakota have taken varying approaches to regulating short-term rentals. For example, Custer, Deadwood, and Hill City have all passed ordinances banning new short-term rentals in areas zoned residential. These measures aim to preserve the character of residential neighborhoods while still allowing existing short-term rentals to operate.

On the other hand, Sioux Falls has recently implemented a permit requirement for all long- and short-term residential rental units as of January 1, 2024. Property owners and property managers must obtain a permit from the city, provide necessary information, and pay a $50 fee per address after July 1, 2024. Short-term rental operators in Sioux Falls must also obtain a state sales tax license and a lodging license from the South Dakota Department of Health.

Starting a Short-Term Rental Business in South Dakota

To start a short-term rental business in South Dakota, individuals must navigate the specific regulations outlined by their local government. In Rapid City, for example, the city's zoning code and municipal ordinances dictate the types of properties eligible for short-term rentals, such as bed and breakfast facilities or vacation home rentals with defined guest room limits.

Obtaining a short-term rental permit is a fundamental requirement in many cities, like Rapid City, before commencing operations to ensure compliance with local regulations. Documentation demonstrating licensure and registration with state regulatory agencies, such as the Department of Health and Department of Revenue, is also essential for short-term rentals in South Dakota.

When searching for short-term, family-sized rentals in Sioux Falls, options may be limited due to the housing shortage and landlords' preference for longer leases. Platforms like Airbnb, VRBO, and Furnished Finder can be helpful resources for finding suitable accommodations. However, renters should expect to pay a premium for short-term leases compared to 12-month lease terms.

As the short-term rental industry continues to grow in South Dakota, it is crucial for property owners and managers to stay informed about the evolving regulatory landscape. By understanding and adhering to local ordinances and state requirements, short-term rental operators can successfully navigate the challenges and opportunities presented by this dynamic sector of the hospitality industry.

Short-Term Rental Licensing Requirement in South Dakota

In South Dakota, the licensing requirements for short-term rentals vary by city and county. While there are no statewide regulations specifically targeting platforms like Airbnb or VRBO, short-term rental operators may still have state sales tax obligations and need to comply with local ordinances.

According to the South Dakota Department of Health, individuals looking to start a short-term rental business, such as a bed and breakfast, specialty resort, or vacation home, must follow a five-step process to obtain a lodging establishment license:

• Complete the Lodging Licensing Packet: Download the necessary materials from the Department of Health website or request a packet by calling the Office of Health Protection.
• Meet Requirements: Submit a detailed floor plan of lodging and water recreational facilities to the Office of Health Protection 30 days before construction starts. Complete, notarize, and submit the license/registration application with the correct fee 30 days before completion of construction.
• Department of Health Review: The Department reviews the layout plan and plan review questionnaire, sending written notification regarding approval or changes required.
• State Inspection: During construction and before the business opening, the Department conducts an onsite inspection to determine compliance with administrative rules.
• Approval for Licensing: The Department issues a lodging license once the application is made, the plan review is completed, and the final inspection determines compliance.

Short-term rental operators must submit their application materials and fees to:

SD Department of Health - Office of Health Protection
600 E. Capitol
Pierre, SD 57501-2536

Failure to obtain the required license can result in penalties or fines. The specific fees and processing times may vary depending on the type of lodging establishment.

In addition to state licensing, short-term rental operators must also comply with local regulations, which can differ significantly by jurisdiction. For example:

1. In Sioux Falls, short-term rentals are required to obtain a permit from the city as of January 1, 2024. Applicants must provide proof of a state sales tax license and a state health department lodging license.
2. Rapid City requires short-term rentals to obtain a permit as per Section 17.50.340 of the Municipal Code. Documentation demonstrating licensure and registration with state agencies like the Department of Health and Department of Revenue is also necessary.
3. Some cities, such as Custer, Deadwood, and Hill City, have passed ordinances banning new short-term rentals in residential zones, while allowing existing ones to continue operating.

It's crucial for short-term rental operators to research and understand the specific licensing requirements and regulations in their local area to ensure compliance and avoid potential penalties. Consulting with local authorities and tax professionals can provide further guidance on navigating the complex landscape of short-term rental regulations in South Dakota.

Required Documents for South Dakota Short-Term Rentals

To operate a short-term rental in South Dakota, property owners must obtain several documents to ensure compliance with state and local regulations. The specific requirements may vary depending on the location and type of rental property. Here are the essential documents needed:

1. Lodging License from the South Dakota Department of Health: All short-term rental properties in South Dakota must obtain a lodging license from the Department of Health. This license ensures that the property meets the necessary health and safety standards. To apply for the license, owners must submit a completed application, pay the required fee, and undergo an inspection.
2. Sales Tax License: Short-term rental operators in South Dakota must obtain a sales tax license from the South Dakota Department of Revenue. This license allows the operator to collect and remit the appropriate sales tax on rental income. The license can be obtained by registering online with the Department of Revenue.
3. Local Permits: Some cities and counties in South Dakota may require additional permits for short-term rentals. For example, Sioux Falls requires a rental permit, which involves providing proof of a state sales tax license and a state health department lodging license. Rapid City also requires a short-term rental permit as per Section 17.50.340 of the Municipal Code.
4. Proof of Ownership or Lease Agreement: Property owners must provide documentation proving their ownership of the rental property or a valid lease agreement if they are not the owner.
5. Insurance: While not legally required, it is highly recommended that short-term rental operators obtain appropriate insurance coverage to protect their property and business.
6. Zoning Compliance: Short-term rental properties must comply with local zoning regulations. Some cities, such as Custer, Deadwood, and Hill City, have banned new short-term rentals in residential areas. Property owners should check with their local zoning office to ensure compliance.
7. Business License: Depending on the local jurisdiction, short-term rental operators may need to obtain a general business license in addition to the specific short-term rental permits.

These documents serve to ensure that short-term rental properties in South Dakota operate safely, fairly, and in compliance with state and local laws. Property owners should contact the relevant state and local authorities to obtain the necessary applications, forms, and information on fees and processing times.

South Dakota Short-Term Rental Taxes

Short-term rental operators in South Dakota are subject to various state and local taxes. Understanding these tax obligations is crucial for compliance and profitability. Here's a breakdown of the main taxes that apply to short-term rentals in South Dakota:

1. South Dakota Sales Tax: The state sales tax rate is 4.5% of the listing price, including any cleaning fees and guest fees, for reservations 27 nights or shorter. This tax is collected and remitted by Airbnb on behalf of hosts.
2. Municipal Sales Tax: In addition to the state sales tax, many municipalities in South Dakota impose their own sales tax, typically ranging from 1% to 2% of the listing price, including any cleaning fees and guest fees, for reservations 27 nights or shorter. These rates vary by municipality, and hosts should consult the South Dakota Department of Revenue Business Tax Division website for detailed information.
3. Municipal Gross Receipts Tax: Some municipalities in South Dakota also levy a gross receipts tax of 1% of the listing price, including any cleaning fees, for reservations 27 nights or shorter. This tax is separate from the municipal sales tax and is collected and remitted by Airbnb on behalf of hosts.
4. Tourism Tax: South Dakota imposes a tourism tax of 1.5% of the listing price, including any cleaning fees, for reservations 27 nights or shorter. This tax is collected and remitted by Airbnb on behalf of hosts.
5. Special Jurisdictions Taxes: For listings located in the Cheyenne River, Crow Creek, Rosebud, Oglala, and Standing Rock Special Jurisdictions, the following taxes apply in lieu of the South Dakota Sales Tax, Municipal Sales Tax, Municipal Gross Receipts Tax, and Tourism Tax:
   1. Sales and Use Tax: 4.5% of the listing price, including any cleaning fees and guest fees, for reservations 27 nights or shorter.
   2. Tourism Tax: 1.5% of the listing price, including any cleaning fees, for reservations 27 nights or shorter.
   3. Municipal City Tax (if applicable): 1-2% of the listing price, including any cleaning fees and guest fees, for reservations 27 nights or shorter.

Short-Term Rental Tax Deductions and Write-Offs

While short-term rental operators in South Dakota are subject to various taxes, they may also be eligible for tax deductions and write-offs that can help reduce their taxable income. Some common deductions include:

1. Depreciation: Depreciating the rental property over 27.5 years (excluding the land) allows for an annual deduction that can substantially decrease taxable income.
2. Property Taxes: The entirety of property taxes paid on a business-classified rental property can be deducted.
3. Mortgage Interest: There is no limit to the mortgage interest deduction for short-term rental properties, as long as the mortgage is secured on the rental property and the loan proceeds are used to buy, build, or improve the property.
4. Repairs and Maintenance: Expenses incurred in maintaining or repairing the property to keep it in rentable condition are fully deductible.
5. Cleaning and Supplies: Costs associated with cleaning the rental property and purchasing necessary supplies are deductible business expenses.
6. Insurance Premiums: Insurance premiums for short-term rental properties can be deducted as a business expense.
7. Home Office: If a portion of the host's home is used exclusively and regularly for managing the short-term rental business, a home office deduction may be claimed.

Short-term rental operators in South Dakota should consult with a tax professional to ensure they are complying with all applicable tax laws and maximizing their deductions. Proper recordkeeping and documentation are essential for claiming deductions and navigating the complex landscape of short-term rental taxation.

Does South Dakota Strictly Enforce STR Rules? Is South Dakota Airbnb friendly?

Based on the available information and discussions from online forums like Reddit and Bigger Pockets, South Dakota does not strictly enforce short-term rental (STR) rules across the state, and the level of Airbnb-friendliness varies significantly between different cities and counties. Overall, South Dakota can be considered relatively Airbnb-friendly compared to many other states, with hosts generally able to operate despite some local regulations.

In Sioux Falls, the largest city in South Dakota, the enforcement of STR rules is notably lax. The city has only recently implemented a permit requirement for short-term rentals, effective January 1, 2024. However, as of now, there are only three properties in the area that currently meet the new regulations, indicating a very low level of enforcement. This suggests that many hosts are operating without strict adherence to the rules, and the city is not aggressively pursuing compliance.

In contrast, some smaller towns and tourist-heavy areas in South Dakota have taken a stricter approach. Cities like Custer, Deadwood, and Hill City have passed ordinances banning new short-term rentals in areas zoned residential. However, even in these locations, enforcement is not uniformly strict. Existing STRs are often grandfathered in, and there are exceptions for owner-occupied rentals or during special events like the Sturgis Motorcycle Rally.

Many hosts in South Dakota operate their STRs despite local rules, taking advantage of the generally relaxed enforcement. On forums, hosts frequently discuss strategies for flying under the radar or exploiting loopholes in local regulations. For example, some hosts in areas with restrictions on short-term rentals offer longer minimum stays to technically comply with rules while still catering to the short-term market.

The state's overall approach to STRs seems to be driven by a desire to balance the economic benefits of tourism with the need to maintain community character. This has resulted in a patchwork of regulations that are often loosely enforced, allowing many hosts to operate with minimal interference.

In conclusion, while South Dakota has some regulations in place for short-term rentals, the state as a whole does not strictly enforce these rules. The Airbnb-friendliness of South Dakota is generally higher than in many other states, with hosts often able to operate despite local regulations. This creates an environment where short-term rentals continue to thrive, contributing to the state's tourism economy while sometimes operating in a legal grey area.

How to Start a Short-Term Rental Business in South Dakota

Starting a short-term rental business in South Dakota involves several key steps to ensure compliance with state and local regulations. Here's a comprehensive guide to help you navigate the process:

Research local regulations: Familiarize yourself with the specific short-term rental regulations in your city or county. Cities like Sioux Falls, Rapid City, and Deadwood have their own ordinances governing short-term rentals, such as permit requirements, zoning restrictions, and occupancy limits. Understanding these regulations is crucial to avoid potential fines or legal issues.

Obtain necessary permits and licenses: Apply for the required permits and licenses based on your location. In Sioux Falls, you'll need to obtain a rental permit from the city, which involves providing proof of a state sales tax license and a state health department lodging license. Rapid City also requires a short-term rental permit as per Section 17.50.340 of the Municipal Code. Be prepared to pay any associated fees and undergo inspections to ensure compliance with health and safety standards.

Register with the South Dakota Department of Health: All short-term rental properties in South Dakota must obtain a lodging license from the Department of Health. Follow the five-step process outlined by the department, which includes submitting a detailed floor plan, completing a license application, and undergoing an inspection. This ensures your property meets the necessary health and safety requirements.

Obtain a sales tax license: Register with the South Dakota Department of Revenue to obtain a sales tax license. This allows you to collect and remit the appropriate sales tax on your rental income6. Keep accurate records of your rental transactions and tax collections to facilitate proper reporting and filing.

Prepare your property: Ensure your short-term rental property is well-maintained, clean, and equipped with all necessary amenities to provide a pleasant stay for your guests. Consider hiring a professional cleaning service between guest stays to maintain a high standard of cleanliness and hygiene.

Create a compelling listing: Craft an attractive and informative listing on popular short-term rental platforms like Airbnb or Vrbo. Include high-quality photos, a detailed description of your property and its amenities, and any unique selling points that set your rental apart from others in the area. Be transparent about your pricing, house rules, and any additional fees or taxes guests may incur.

Implement a guest screening process: Establish a thorough guest screening process to ensure the safety and security of your property and the surrounding community. This may include requiring guests to provide valid identification, setting minimum age requirements, and clearly communicating your house rules and expectations.

Manage your bookings and guest communication: Use a reliable system to manage your bookings, whether through the rental platform's built-in tools or a separate property management software. Respond promptly to guest inquiries, provide clear check-in instructions, and be available to address any concerns or issues that may arise during their stay.

Maintain accurate records and comply with tax obligations: Keep detailed records of your rental income and expenses, including any taxes collected and remitted. File your tax returns on time and comply with all reporting requirements to avoid penalties or legal issues.

Stay informed and adapt to changes: The short-term rental landscape in South Dakota is evolving, with new regulations and ordinances being introduced in various cities and counties. Stay informed about any changes that may impact your business and be prepared to adapt your operations accordingly.

By following these steps and staying compliant with state and local regulations, you can successfully start and operate a short-term rental business in South Dakota. Remember to prioritize guest satisfaction, maintain open communication with local authorities, and continually improve your property and services to stand out in the competitive short-term rental market.

Who to Contact in South Dakota about Short-Term Rental Regulations and Zoning?

In South Dakota, short-term rental regulations and zoning can vary significantly between different cities and counties. Here are some key contacts and resources for obtaining information about short-term rental regulations and zoning in South Dakota:

South Dakota Department of Health - Office of Health Protection

1. Address: 600 E. Capitol, Pierre, SD 57501-2536
2. Phone: (605) 773-4945
3. Website: https://doh.sd.gov/topics/food-lodging-safety/licensure-and-codes/lodging/
4. This office oversees lodging licenses for short-term rentals and can provide information on state-level requirements for operating a short-term rental business.

South Dakota Department of Revenue

1. Address: 445 E. Capitol Ave., Pierre, SD 57501
2. Phone: (605) 773-3311
3. Email: bustax@state.sd.us
4. Website: https://dor.sd.gov/
5. Contact this department for information on sales tax licenses and other tax-related matters for short-term rentals.

City of Sioux Falls Planning and Development Services

1. Address: 231 N. Dakota Ave., Sioux Falls, SD 57104
2. Phone: (605) 367-8740
3. Website: https://www.siouxfalls.org/planning-dev
4. For short-term rental regulations specific to Sioux Falls, this is the primary point of contact.

Rapid City Community Planning & Development Services

1. Address: 300 Sixth Street, Rapid City, SD 57701-2724
2. Phone: (605) 394-4120
3. Email: planning@rcgov.org
4. Website: https://www.rcgov.org/departments/community-planning-development.html
5. This department handles short-term rental regulations and zoning in Rapid City.

South Dakota Hotel and Lodging Association

• Website: https://www.sdhla.com/
• While not a regulatory body, this association can provide valuable resources and information for short-term rental operators in South Dakota.

For hosts looking to connect with others and stay informed about short-term rental regulations and best practices in South Dakota, consider joining these online communities:

Airbnb Community Center - Dakotas Forum

• https://community.withairbnb.com/t5/Dakotas/bd-p/Dakotas
• This forum allows hosts to discuss issues specific to the Dakotas, including South Dakota.

BiggerPockets Real Estate Forums - South Dakota

• https://www.biggerpockets.com/forums/511-south-dakota-real-estate
• While not exclusively for short-term rentals, this forum can be a valuable resource for real estate investors in South Dakota, including those interested in short-term rentals.

Reddit - r/SouthDakota

• https://www.reddit.com/r/SouthDakota/
• This subreddit, while general to South Dakota, can be a place to discuss local regulations and connect with other hosts in the state.

Remember to always verify the most current regulations with official sources, as short-term rental laws and zoning requirements can change over time. Joining local real estate or hospitality associations can also provide valuable networking opportunities and access to up-to-date information on regulations affecting short-term rentals in South Dakota.

What Do Airbnb Hosts in South Dakota on Reddit and Bigger Pockets Think about Local Regulations?

Airbnb hosts in South Dakota have mixed opinions about local regulations governing short-term rentals. Here are a few real-life experiences and stories shared by hosts on various online forums:

Reddit - r/AirBnB: In a recent thread, a guest shared their experience of unknowingly staying in an illegal short-term rental in a city with a high cost of living and housing affordability issues. While the stay itself was pleasant, the guest felt conflicted about whether to report the host for violating building rules and not registering the property with the city. This sparked a discussion about the importance of hosts complying with local regulations and the potential consequences of operating illegal short-term rentals.

BiggerPockets Forum: A host from Rapid City, South Dakota, shared their experience navigating the city's short-term rental regulations. They mentioned that obtaining a permit from the city was a relatively straightforward process, but emphasized the importance of understanding and adhering to the specific requirements outlined in the municipal code. The host also noted that the city's regulations helped maintain a balance between supporting the short-term rental industry and preserving the character of residential neighborhoods.

Airbnb Community Center - Dakotas Forum: In a discussion about the challenges of operating short-term rentals in South Dakota, several hosts expressed frustration with the patchwork of regulations across different cities and counties. Some hosts felt that the lack of uniformity made it difficult to navigate the legal landscape and comply with varying requirements. Others argued that local control was important for communities to manage the impact of short-term rentals on housing availability and neighborhood character.

These experiences and discussions highlight the ongoing debate among Airbnb hosts in South Dakota regarding the appropriate level of regulation for short-term rentals. While some hosts advocate for minimal restrictions to protect property rights and support the growth of the industry, others recognize the need for balanced regulations that consider the interests of both short-term rental operators and the wider community.

As local governments in South Dakota continue to grapple with the challenges posed by the rapid growth of short-term rentals, it is likely that hosts will remain engaged in the conversation, sharing their experiences and perspectives on how best to regulate this dynamic and evolving industry.

Disclaimer: While we here at BNBCalc strive to keep all of our regulation guides updated and accurate with all the latest local laws, we still do not suggest using them as your sole or primary source for local regulations. We also do not recommend you rely on the third-party sources we link to or reference, and we are not responsible for any of the information on these third-party sites. These guides are for entertainment purposes only and only provide basic information and should not be considered as legal advice.

We highly recommend directly contacting the responsible parties for each area and hearing what their officials have to say. Ultimately, it's your responsibility as an investor to ensure you fully comply with the local laws, and it's best to speak with professionals before making an investment decision.