The Department of Revenue and Airbnb announced last Thursday that Airbnb has agreed to start collecting taxes in our fair state starting September 1. Airbnb says it will collect the 4.5% state sales tax, the 1% to 2% local sales tax, the 1% municipal gross receipts tax, and the 1.5% tourism tax. Airbnb will also collect taxes on the five tribes with which South Dakota has collection agreements (Cheyenne River, Crow Creek, Standing Rock, Oglala, and Rosebud).
Airbnb currently has tax collection agreements with 33 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Minnesota is not currently on that list, but that doesn’t mean that, come September 1, Minnesota’s Airbnb hosts can brag about offering cheaper accommodations than their tax-drunk South Dakota neighbors. It just means that Airbnb is centralizing tax collection and remittance in South Dakota; Minnesota still expects Airbnb hosts to collect and remit sales tax themselves.
The Department of Revenue reports 26,000 Airbnb visitors to South Dakota in the last year and over 600 Airbnb hosts in South Dakota making a “typical” $4,400 a year. That’s an average of 43 visitors per host and just over $100 per visit. When I search Airbnb’s listings, I find average South Dakota per-night prices of $116 at the beginning of January, $199 on Easter weekend at the beginning of April, $152 to stay overnight June 29, and $148 during pheasant season on October 26. The average for August 6, the Monday of next year’s Sturgis Rally, is only $143, but as of this morning, over 80% of Airbnb’s South Dakota offerings have already been reserved.
If we stick with DOR’s numbers, 600 hosts making $4,400 a pop represents just $2.64 million in annual income. That total income would generate around $120,000 in state sales tax and around $92,000 in local sales and tourism tax. But we shouldn’t see a sudden surge in tax revenue or an 8% jump in Airbnb prices in South Dakota: after all, Airbnb is simply assuming the tax collection and remittance duties that good, law-abiding South Dakota hosts have surely been following all along.