How Sioux Falls Handles Hotels & Lodging: A Practical Guide

Sioux Falls maintains 192 local ordinances across all categories, and 2 of those deal specifically with hotels & lodging. Here is a breakdown of what the city actually requires, what is prohibited, and where Sioux Falls falls on the strict-to-permissive spectrum compared to other cities.

Transient Occupancy Tax

Sioux Falls hotel guests pay roughly 12.5% in combined lodging taxes, including a 6% state municipal lodging facility tax, the 4.5% state sales tax, and a 2% Sioux Falls municipal sales tax on rooms.

Key details: Combined rate: Approximately 12.5%. State sales tax: 4.5% (SDCL 10-45). State tourism: 1.5%. City lodging: 2% plus 1% BBB tax.

Hotels and STR hosts that fail to register, collect, or remit lodging taxes face SD Department of Revenue assessments, penalties, interest, and possible loss of city business licensing or STR registration.

Hotel Living Wage

Sioux Falls does not impose a hotel-specific living-wage rule; SD law (SDCL §60-11-3) preempts local minimum-wage ordinances, leaving hotel pay to the CPI-indexed state minimum near $11.50 plus market rates.

Key details: Local mandate: None. State preemption: SDCL §60-11-3. State minimum: CPI-indexed near $11.50. Tipped minimum: Separate lower rate.

Because SD preempts local wage minimums, hotels paying at or above the CPI-indexed state minimum are compliant; underpayment triggers SD Department of Labor wage-and-hour claims and federal FLSA actions.

The rules around hotel living wage in Sioux Falls lean permissive, but that does not mean anything goes.

The Bottom Line

Sioux Falls's hotels & lodging rules are a mixed bag. Some areas are strict, others are relaxed, and the details matter. The best approach is to check the specific rule that applies to your situation rather than assuming Sioux Falls is broadly strict or permissive.

Keep in mind that Sioux Falls can amend these rules at any council meeting. For the most current version of any rule mentioned here, check the specific ordinance page, where we track updates as they happen.