Quick answer
A single freelancer in South Dakota with $75,000 of profit pays no South Dakota income tax in 2026, but still owes about $15,495 of federal tax (self-employment tax of 15.3% on 92.35% of profit plus income tax), keeping about $59,505. South Dakota sales tax applies to most services, so many freelancers must collect it from clients.
South Dakota has no personal income tax, so the income tax side of a South Dakota freelancer’s bill is entirely federal. The catch is on the other side of the invoice: South Dakota’s sales tax applies to services unless the law specifically exempts them, so many freelancers here have to collect sales tax from their clients. Here is what a South Dakota freelancer owes.
How South Dakota compares: in our 50-state take-home pay ranking, a single freelancer with $75,000 of profit keeps $59,505 in South Dakota after federal and state income tax, tied for 1st of 51 with the other places that charge this freelancer no state income tax.
Set aside from every payment
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That is $0 of every $1,000 you receive
- Federal income tax share
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- Self-employment tax share
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- State tax share
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- Total to save this year
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Estimate for information only — not tax, legal or financial advice. Federal figures for tax year 2026; state and local taxes are not included unless you enter them. Check your situation with a CPA or enrolled agent.
What you pay on freelance profit
| Tax | Rate |
|---|---|
| Federal self-employment tax | 15.3% on 92.35% of profit (12.4% part capped at $184,500 for 2026) |
| Federal income tax | 10%–37% |
| South Dakota income tax | None — South Dakota has no personal or corporate income tax |
| South Dakota sales tax | 4.2% state rate on taxable products and services, collected from your clients |
| Municipal sales tax | 1% to 2% on top of the state rate in cities that impose it; no city or county income tax |
No income tax, and no state estimated payments
The South Dakota Department of Revenue states plainly that the state does not have a corporate, unitary or personal income tax. There is no state return to file on your freelance profit and no state estimated tax to pay. Your quarterly payments go only to the IRS: April 15, June 15 and September 15, 2026, and January 15, 2027. The quarterly estimated tax calculator will size each payment.
Sales tax on services: the part freelancers miss
Most states tax goods and only a short list of services. South Dakota works the other way around. Its sales tax applies to the sale of services as well as products, and a service is exempt only when the law specifically exempts it. The state rate is 4.2% for 2026. Under current law, that rate is scheduled to rise to 4.5% on July 1, 2027.
The Department of Revenue’s guidance shows how broad this is:
- Professional business services such as consulting and public relations are taxable.
- Attorney services are taxable, and so are accounting services.
- Website development and website maintenance are taxable (web hosting is not).
- Photography is taxable, including separately charged sitting fees.
The exemptions are specific. The department’s examples of exempt services include health services, educational services, social services, agricultural and forestry services, insurance commissions, licensed brokers’ services, trucking, travel agent services and construction services (which fall under a separate contractor’s excise tax). An advertising agency’s fee is also exempt when the agency both prepares the ad and places it in the media; ad work handed to the client to place is taxable.
Sales tax applies where the customer receives the service. If you work with clients in other states, check the department’s guidance for your type of service before deciding whether South Dakota tax applies.
Municipal sales tax and the sales tax license
Cities can add their own sales tax of 1% to 2%, which applies to the same products and services as the state tax. Your total rate depends on where the customer receives the service, and the department has a rate lookup tool on its website.
Any business with a physical presence in South Dakota that sells taxable products or services needs a sales tax license, whether it is a sole proprietorship or an LLC. There is no fee for the license, and you apply online with the Department of Revenue. Sales tax isn’t a cost of your business. It’s your client’s money that you hold until you file, so add it to your invoices rather than absorbing it.
If you have an LLC
A South Dakota LLC costs $150 to form online and files an annual report with the Secretary of State each year. The fee is $55 online or $70 on paper, and a late report adds a $55 penalty. An LLC doesn’t change your income tax picture in South Dakota, since there is no state income tax for it to pay. If you’re weighing an S corp election, the savings would come from federal self-employment tax only.
How much to set aside
For income tax, South Dakota freelancers only need to cover federal tax. In the tax set-aside calculator, leave the state rate at 0. For a single freelancer that is typically around 17%–24% of profit, depending on income. Keep the sales tax you collect in a separate account so it’s ready when your return is due, and budget the $55 LLC annual report if you have one.
Frequently asked questions
Does South Dakota have a state income tax for freelancers?
No. South Dakota has no personal or corporate income tax, so there's no state return on freelance profit and no state estimated tax. Your quarterly payments go only to the IRS: April 15, June 15 and September 15, 2026, and January 15, 2027.
Do I have to charge sales tax on services in South Dakota?
Often, yes. South Dakota's sales tax applies to services unless the law specifically exempts them. Consulting, public relations, accounting, website development and photography are taxable. The state rate is 4.2% for 2026, scheduled to rise to 4.5% on July 1, 2027, plus 1% to 2% municipal tax.
Do South Dakota freelancers need a sales tax license?
Yes, if you sell taxable products or services and have a physical presence in South Dakota, whether as a sole proprietorship or LLC. There's no fee, and you apply online with the Department of Revenue.
How much does a South Dakota LLC cost?
$150 to form online, then an annual report each year costing $55 online or $70 on paper. A late report adds a $55 penalty. An LLC doesn't change your income tax picture, since South Dakota has no state income tax.