How to Start an Airbnb Business in South Dakota

South Dakota drew over 14 million visitors in 2023, generating $4.4 billion in tourism spending — a remarkable figure for a state with just 900,000 residents. Mount Rushmore alone accounts for nearly 3 million annual visitors, and the surrounding Black Hills region has evolved into one of the most concentrated tourism corridors in the American West. Add the Sturgis Motorcycle Rally (500,000+ attendees over 10 days), Deadwood’s gaming and historic tourism, and Badlands National Park’s dramatic landscape, and you have a state with multiple high-demand STR markets.

What makes South Dakota especially attractive for short-term rental operators is the combination of strong demand and favorable business conditions. No state income tax. Moderate property prices. Growing tourism infrastructure. And a regulatory environment that leans heavily toward property rights.

Whether you’re looking at a cabin near Custer State Park, a rental arbitrage apartment in Rapid City, or a downtown Deadwood property that captures gaming tourists, this guide covers the full strategy for building an STR business in the Mount Rushmore State.

Why South Dakota Is a Top Market for Short-Term Rentals

South Dakota’s STR opportunity is built on several distinct advantages:

• No state income tax. South Dakota is one of nine states with no state income tax. Your net rental profits are taxed only at the federal level — a significant advantage that directly impacts your bottom line, especially as you scale.
• Concentrated tourism demand. The Black Hills/Rapid City corridor (including Mount Rushmore, Crazy Horse Memorial, Custer State Park, Wind Cave, and Jewel Cave) creates an extraordinarily dense tourism zone. Millions of visitors need accommodation in a relatively small geographic area.
• Sturgis Rally demand spike. The Sturgis Motorcycle Rally (first full week of August) brings 500,000+ attendees to western South Dakota. Properties within a 60-mile radius of Sturgis can charge 3-5x normal rates during rally week. Some hosts earn 20-30% of their annual revenue in this single week.
• Deadwood’s unique draw. Deadwood is one of only a handful of historic gaming towns in the U.S. Legal casinos, Wild West history, and regular events create year-round visitor demand that most small mountain towns lack.
• Affordable entry points. Median home prices in Rapid City hover around $310,000. Properties in smaller Black Hills towns (Hill City, Keystone, Hot Springs) can be acquired for $200,000-$350,000. Compared to Colorado mountain towns with similar tourism appeal, South Dakota’s entry costs are dramatically lower.
• Growing Sioux Falls economy. South Dakota’s largest city (population 200,000+) has experienced rapid economic growth, attracting corporate relocations and creating business travel demand that didn’t exist a decade ago.

South Dakota Short-Term Rental Laws and Regulations

South Dakota is one of the most operator-friendly states for short-term rentals. The state has not enacted comprehensive STR legislation, and municipal regulations tend to be moderate. That said, specific cities have their own requirements that you must follow.

State-Level Requirements

• Sales tax collection. South Dakota requires STR operators to collect and remit the state’s 4.5% sales tax on accommodation revenue. Register for a sales tax license through the South Dakota Department of Revenue.
• Tourism tax. An additional 1.5% tourism tax applies to gross receipts from tourism-related businesses, including short-term rentals. This is collected alongside the state sales tax for a combined state rate of 6%.
• No state STR license or registration. South Dakota does not require a state-level STR permit, registration, or inspection for short-term rental operators.
• Basic safety compliance. Properties must meet South Dakota’s building and fire codes, including smoke detectors and carbon monoxide detectors.

Key City Regulations

Rapid City: Rapid City is the primary base for Black Hills tourism, and its STR regulations reflect the balance between supporting tourism and maintaining residential character. The city requires a Vacation Rental License for properties rented for fewer than 30 consecutive days. The license involves application, property inspection, proof of insurance, and an annual fee of approximately $250. Rapid City distinguishes between owner-occupied and non-owner-occupied vacation rentals, with non-owner-occupied properties facing additional requirements including a local contact within 30 minutes and maximum occupancy limits. The city’s STR ordinance has been revised several times and continues to evolve.

Deadwood: Deadwood embraces tourism as its economic lifeblood. The city requires a business license for STR operators and compliance with historic district building standards for properties in the downtown core. Deadwood’s approach is generally permissive — the city wants visitor accommodation supply. License fees are modest ($75-$150). Properties must comply with fire safety standards, which are particularly stringent for historic buildings. Deadwood’s gaming-adjacent location means demand is more consistent year-round than other Black Hills communities.

Sioux Falls: South Dakota’s largest city requires STR operators to obtain a conditional use permit for short-term rental activity in residential zones. The permit process involves a public hearing, which can take 4-8 weeks. Sioux Falls focuses on parking requirements, noise standards, and occupancy limits. The city’s approach has become slightly more restrictive in neighborhoods with high STR concentrations. Downtown and mixed-use zones have fewer restrictions. Permit fees run approximately $200-$350.

Hill City / Keystone / Custer: These smaller Black Hills towns are heavily tourism-dependent and generally welcoming to STRs. Requirements are minimal — basic business registration with the city or county, compliance with building codes, and tax collection. Keystone (the gateway town to Mount Rushmore) has particularly light regulation given its entire economy revolves around visitor accommodation. Hill City has grown as a craft beer and arts destination, adding year-round appeal beyond summer tourism.

Recent Regulatory Changes (2025-2026)

South Dakota’s 2025 legislative session maintained the state’s pro-property-rights stance. No restrictive STR legislation advanced. At the municipal level, Rapid City has continued refining its Vacation Rental License process, adding an online renewal option and streamlining inspections for compliant operators. Sioux Falls has discussed density caps in specific neighborhoods but hasn’t implemented them. The overall regulatory trajectory remains favorable for operators.

Tax Obligations for South Dakota Airbnb Hosts

South Dakota’s tax structure is one of the most favorable for STR operators in the country, primarily because of the absence of state income tax.

State sales tax (4.5%): Applies to all short-term accommodation revenue. Register for a sales tax license with the South Dakota Department of Revenue and file returns monthly, quarterly, or annually depending on your volume.

State tourism tax (1.5%): An additional 1.5% applies to tourism-related businesses, bringing the combined state rate to 6% for STR operators.

Municipal sales tax (0-2%): South Dakota municipalities can impose their own sales tax on top of the state rate. Rapid City charges an additional 2% (bringing the total to 8%). Sioux Falls charges 2% (total 8%). Deadwood charges 2% (total 8%). Smaller towns may have lower or no municipal sales tax.

Bed, board, and alcohol tax (BBA — Deadwood only): Deadwood levies a specific tax on accommodation revenue that funds historic preservation and city infrastructure. This is an additional 1% on top of other taxes. Deadwood STR operators should budget for this additional layer.

No state income tax: This is the headline advantage. South Dakota levies no personal income tax and no corporate income tax. Your net rental profits are subject only to federal income tax and self-employment tax. For a host netting $50,000/year from STRs, the absence of state income tax saves $2,000-$4,000 compared to states with 4-6% income tax rates.

Platform tax collection: Airbnb collects and remits state sales tax and tourism tax in South Dakota. Municipal taxes may or may not be collected by platforms — verify with your specific city and platform.

Best Cities for Airbnb in South Dakota

Rapid City

Rapid City is the hub of Black Hills tourism and South Dakota’s strongest year-round STR market. The city’s proximity to Mount Rushmore (25 minutes), Crazy Horse Memorial (35 minutes), and Custer State Park (40 minutes) makes it the default base for families exploring the region. Rapid City also benefits from Ellsworth Air Force Base (military families and TDY travelers), regional medical facilities, and a growing tech sector. ADRs for a two-bedroom average $140-$220 during summer peak and $90-$130 in the off-season. Annual occupancy runs 55-68%, with June through August driving the bulk of revenue. A well-managed two-bedroom can gross $35,000-$50,000 annually. Properties near downtown or the Rushmore Mall area perform best. Arbitrage is possible — Rapid City two-bedroom apartments lease for $1,100-$1,500/month.

Deadwood / Lead

Deadwood’s unique combination of gaming, Wild West history, and Black Hills proximity creates more consistent year-round demand than most small mountain towns. The Deadwood casinos draw visitors regardless of season, and events like Days of ’76, Kool Deadwood Nites, and Deadwood Alive extend the tourism calendar. Lead (neighboring town, home to the historic Homestake Mine) offers more affordable property prices while still capturing Deadwood visitor overflow. ADRs for Deadwood properties average $130-$200 in summer and $90-$140 in off-season. Occupancy runs 50-62% annually. Gross revenue for a quality two-bedroom: $28,000-$42,000. Properties within walking distance of Main Street command the highest rates.

Keystone / Hill City (Mount Rushmore Corridor)

Keystone sits at the base of Mount Rushmore and captures foot traffic from the memorial’s 2.5+ million annual visitors. Hill City (10 miles south) has emerged as a craft beer and arts destination with its own draw beyond serving as a Mount Rushmore base. Both towns are extremely seasonal — summer occupancy can hit 85-90%, while winter drops to 15-25%. ADRs range $150-$280 in summer and $80-$120 in the off-season. The concentrated summer revenue can be substantial: a well-positioned Keystone cabin might gross $30,000-$40,000 in the June-August window alone. Annual totals range $35,000-$50,000 for strong performers. Sturgis Rally week (August) boosts rates even further for the entire corridor.

Sioux Falls

South Dakota’s largest city produces the most consistent year-round STR demand in the state. Corporate travel (the city is home to major financial and healthcare companies), Sioux Falls events (the Sioux Empire Fair, Canaries baseball, University of Sioux Falls and Augustana events), and a growing food and entertainment scene drive steady bookings. ADRs average $100-$150 for a two-bedroom. Occupancy runs 60-70% annually — the highest consistent rate in the state because demand doesn’t crater in winter the way it does in the Black Hills. Gross revenue for a well-managed unit: $25,000-$35,000. The market is well-suited for arbitrage — apartments in downtown Sioux Falls and the East Bank area lease for $1,000-$1,400/month.

Custer / Hot Springs

Custer sits at the entrance to Custer State Park, home to one of the country’s largest free-roaming bison herds and the famous Wildlife Loop Road. Hot Springs (30 minutes south) offers natural warm mineral springs, the Mammoth Site, and a charming downtown. Both towns serve as quieter alternatives to Rapid City for Black Hills visitors. ADRs range $120-$200 in summer, dropping to $70-$100 in off-season. Annual occupancy averages 40-55%. Gross revenue for a two-bedroom: $20,000-$35,000. These markets appeal to hosts who want lower acquisition costs and a more relaxed management pace while still capturing meaningful summer tourism revenue.

How Much Do Airbnbs Make in South Dakota?

South Dakota’s STR revenue follows a clear geographic pattern: Black Hills properties earn more per night but face seasonal concentration, while Sioux Falls properties earn less per night but maintain year-round consistency.

A two-bedroom cabin in the Keystone/Hill City corridor can gross $35,000-$50,000 annually, with roughly $25,000-$35,000 of that coming from the June-August peak. Sturgis Rally week alone can generate $2,000-$5,000 depending on proximity to the rally route and property capacity.

Rapid City offers the best balance of ADR and occupancy. A two-bedroom near downtown grossing $42,000 annually is realistic with professional management and dynamic pricing. For arbitrage operators, a $1,300/month lease at $155/night ADR with 62% occupancy produces roughly $35,100 in gross revenue. After lease costs ($15,600), cleaning ($3,500), supplies ($1,000), and platform fees ($2,800), net profit per unit lands around $12,200 — among the better arbitrage margins in the Great Plains.

Sioux Falls produces steadier but lower absolute numbers. A two-bedroom grossing $30,000 annually with consistent 65% occupancy provides predictable cash flow without the summer-or-bust revenue pattern of the Black Hills. For operators who prefer reliability over peak-season adrenaline, Sioux Falls delivers.

The no-income-tax advantage compounds as you scale. An operator with five properties grossing $200,000 combined saves $8,000-$12,000 annually compared to the same portfolio in a state with a 4-6% income tax rate. Over a decade, that’s $80,000-$120,000 in retained earnings — enough to acquire another property. That’s why scaling in a no-income-tax state creates a compounding advantage that’s hard to replicate elsewhere.

How to Start Your South Dakota Airbnb Business

Step 1: Select your market and demand profile. Black Hills seasonal tourism, Deadwood year-round gaming visitors, Sioux Falls corporate travelers, and Sturgis Rally crowds all require different property types, furnishing strategies, and pricing approaches. Know your guest before you commit capital.

Step 2: Verify local licensing requirements. Rapid City requires a Vacation Rental License with inspection. Sioux Falls requires a conditional use permit with public hearing. Deadwood requires a business license. Smaller Black Hills towns typically require basic business registration only. Confirm requirements with your city before proceeding.

Step 3: Register for state tax collection. Apply for a sales tax license through the South Dakota Department of Revenue. You’ll collect the combined 6% (4.5% sales + 1.5% tourism) plus any applicable municipal sales tax. The registration process is straightforward and can be completed online.

Step 4: Form your LLC. File with the South Dakota Secretary of State ($150 filing fee). South Dakota’s business-friendly environment makes formation quick — online filings are typically processed within 1-3 business days. South Dakota LLCs don’t require annual reports with fees, which reduces ongoing administrative costs.

Step 5: Acquire or lease your property. For Black Hills purchases, focus on properties with both summer and off-season appeal — hot tubs, fireplaces, and proximity to Deadwood or indoor attractions extend your booking season. For Rapid City or Sioux Falls arbitrage, target apartments in areas with strong walkability and event proximity. For Sturgis-area investments, consider properties that serve dual purpose: vacation rental most of the year and premium rally housing in August.

Step 6: Furnish to match your market. Black Hills guests expect mountain cabin aesthetics — wood accents, outdoor spaces, fire pits, wildlife and nature decor that feels authentic rather than forced. Sioux Falls guests want modern, clean, urban-adjacent convenience. Sturgis Rally guests need secure motorcycle parking, garage access if possible, and durable furnishings (not white couches).

Step 7: Build your pricing calendar around events. South Dakota’s event calendar has dramatic pricing implications. Sturgis Rally (August): 3-5x normal rates. Mount Rushmore fireworks (typically July 3-4 when held): 2-3x. Crazy Horse Memorial events: 1.5-2x. SDSU and USD football weekends: 1.5x in Sioux Falls. Program these premiums into your pricing tool from day one.

Step 8: Optimize for the platforms that matter. In Rapid City and the Black Hills, Airbnb and VRBO both drive significant bookings — list on both. In Sioux Falls, Airbnb dominates but corporate booking sites (Booking.com, direct outreach to companies) can supplement. For Sturgis Rally specifically, dedicated rally housing sites and Facebook groups drive bookings that never touch Airbnb.

Step 9: Plan your off-season strategy. The difference between a good and great Black Hills host is how they handle October through May. Monthly rental discounts for seasonal workers, partnerships with Deadwood casinos for visitor packages, and targeting hunters (South Dakota’s pheasant hunting season draws thousands) can fill winter gaps that purely tourism-dependent hosts miss.

South Dakota STR Insurance and Liability

South Dakota’s climate and tourism patterns create specific insurance considerations.

Severe weather: Western South Dakota experiences hailstorms that can cause significant property damage. The Black Hills are also susceptible to rapid-onset thunderstorms and occasional wildfire conditions. Ensure your policy provides comprehensive wind, hail, and fire coverage. Hail deductibles in western South Dakota can be 1-2% of the insured value — review this provision carefully.

Winter property risks: Frozen pipes are a real concern in South Dakota’s harsh winters (temperatures regularly drop below -10°F). If your property may be unoccupied during winter months, install remote temperature monitoring systems and ensure your insurance covers frozen pipe damage. Some policies require minimum interior temperature maintenance to keep coverage active.

Sturgis Rally liability: If you rent to Sturgis Rally attendees, discuss this specifically with your insurer. Rally periods involve higher-than-normal liability exposure due to large gatherings, alcohol consumption, and motorcycle-related activities on or near your property. Some insurers charge a premium surcharge for rally-period rentals.

Wildlife encounters: Black Hills properties may have interactions with wildlife (bison in Custer State Park areas, mountain lions, bears occasionally). While rare, guest injuries from wildlife encounters create liability questions. Ensure your policy addresses wildlife-related claims and consider posting clear wildlife safety information for guests.

STR insurance in South Dakota typically runs $1,200-$2,500 annually. Providers like Proper, CBIZ, and Safely write policies in the state. For comprehensive coverage analysis, see our guide on whether insurance covers Airbnb hosting.

Why 10XBNB Gives You the Edge in South Dakota

South Dakota’s STR market rewards hosts who master seasonality, niche demand, and operational efficiency. The gap between a host who earns $25,000 from a Black Hills property and one who earns $50,000 from a similar property usually comes down to three things: pricing strategy (especially around Sturgis and peak summer), off-season occupancy tactics, and listing optimization.

10XBNB teaches all three through a proven system. Our students learn how to analyze any market — including seasonal, tourism-driven ones like the Black Hills — and build revenue projections based on actual data rather than wishful thinking. The system covers everything from initial market selection through scaling to multiple properties, with specific strategies for co-hosting and remote management that work in spread-out markets like South Dakota.

South Dakota is one of the best states for STR profitability when you factor in the no-income-tax advantage, affordable property prices, and growing tourism. The operators who capture the most value are the ones with a systematic approach to every aspect of the business. That’s the 10XBNB difference. See how South Dakota compares on our best states for Airbnb ranking.

Frequently Asked Questions