The Tax Foundation

South Dakota

The Facts on South Dakota’s Tax Climate

Here are some basic facts on South Dakota’s tax system and how it compares to other states:

Tax Freedom Day Arrives on April 12 in South Dakota
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, South Dakota taxpayers had to work until April 12 to pay their total tax bill, ranking it 41st highest in the nation. This is 11 days earlier than national Tax Freedom Day (April 23). The Tax Freedom days of neighboring states were: North Dakota, April 12 (ranked 39th); Minnesota, April 27 (ranked 8th); Iowa, April 16 (ranked 34th); Nebraska, April 19 (ranked 25th); Wyoming, April 20 (ranked 21st) and Montana, April 8 (ranked 48th).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

South Dakota's State/Local Tax Burden in 2007
South Dakota's State-Local Tax Burden, 1970-Present

South Dakota's 2008 Business Tax Climate Ranks 2nd
South Dakota ranks 2nd in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: North Dakota (30th), Minnesota (42nd), Iowa (45th), Nebraska (43rd), Wyoming (1st) and Montana (6th).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

South Dakota Levies No Individual Income Tax
South Dakota levies no state individual income tax, joining Alaska, Florida, Nevada, Texas, Washington and Wyoming as the only states to do so.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

South Dakota Levies No Corporate Income Tax
South Dakota levies no general corporate income tax. However, it does impose a bank franchise and bank card tax that collected $79.12 per capita in FY 2006.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

South Dakota Levies Sales Tax below National Median; Gasoline and Cigarette Taxes above Average
South Dakota levies a 4% general sales or use tax on consumers, which is below the national median of 5.4%. State and local governments combined collected $1,441 per capita in general sales taxes in 2005, which ranks 13th highest nationally. South Dakota's gasoline tax stands at 24 cents per gallon, ranking 24th highest nationally. South Dakota's cigarette tax stands at $1.53 per pack of twenty and ranks 14th highest nationally. The sales tax was adopted in 1933, the gasoline tax in 1922 and the cigarette tax in 1923.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

South Dakota Property Taxes: Middle of the Pack
South Dakota's local governments collected $705,183,000 in property taxes during fiscal year 2004, which is the latest year the Census Bureau published state-by-state property tax collections. South Dakota is one of the 13 states that collect no state-level property taxes. Utah is one of the 13 states that collect no state-level property taxes, meaning Utah's per capita property tax collections equaled $915 for all levels of government in FY2004, ranking it 32nd nationally.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: South Dakota is a Beneficiary State
South Dakota taxpayers receive more federal funding per dollar of federal taxes paid compared to the average state. Per dollar of Federal tax collected in 2005, South Dakota citizens received approximately $1.53 in the way of federal spending. This ranks the state 8th highest nationally and represents a rise from 1995 when South Dakota received $1.30 per dollar of taxes in federal spending (ranked 10th). Neighboring states and the federal spending received per dollar of federal taxes collected were: North Dakota ($1.68), Minnesota ($0.72), Iowa ($1.10), Nebraska ($1.10), Wyoming ($1.11), and Montana ($1.47).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

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