Overview: Are Short-Term Rentals Allowed in Hill City, SD?

Direct answer: Short-term rentals are allowed in Hill City, but with significant, recently enacted restrictions. In June 2022, Hill City voters approved a citizen ballot initiative that prohibits new short-term rentals in all residentially zoned areas within city limits. Existing short-term rentals in residential zones are allowed to continue only for as long as the property remains under the same ownership; if the property is sold or changes ownership, it must cease being used as a short-term rental. The city still permits bed-and-breakfast operations and allows any property to be used as a short-term rental during the annual Sturgis Motorcycle Rally per state law. Rentals with leases of 28 days or longer are not subject to the city’s short-term rental ordinance.

What this means for investors:

• New acquisitions or conversions in residentially zoned neighborhoods cannot be launched as short-term rentals.
• Legal paths to operate are limited to: (1) continuing an existing, non‑owner‑occupied short-term rental without a change in ownership; (2) operating as a bed-and-breakfast where the operator resides on site; or (3) siting in a zoning district that is not residential (commercial/industrial), subject to any applicable city processes.
• The city’s policy was motivated by housing availability and neighborhood stability concerns; Hill City saw roughly 10% of its housing units convert to short-term rentals by 2022, while owner-occupied homes declined, prompting decisive regulatory action.

References: www.dakotanewsnow.com/2024/03/10/short-term-rental-regulation-still-puzzle-south-dakota/

How to Start a Short-Term Rental Business in Hill City

1. Confirm zoning feasibility before purchase or conversion

• Because residential zones are closed to new STRs, the first gate is zoning. Verify whether the property is in a non-residential zone (commercial/industrial) where lodging uses may be allowed. Contact the Planning & Zoning Department to confirm eligibility.

2. Secure required state-level authorizations

• South Dakota Sales Tax License: Register with the South Dakota Department of Revenue to collect/remit state sales tax (4.5%) and tourism tax (1.5%) on stays under 28 days.
• Lodging License (SD Department of Health): Required to ensure compliance with health and safety standards for lodging properties.

3. Complete any city/county processes

• Confirm whether a local permit is required (existing sources note city-level rules are restrictive in residential areas, but do not provide a uniform, citywide permitting checklist for non-residential zones).
• If operating a bed-and-breakfast, confirm whether any local registration or inspection applies, and confirm compliance with any state lodging standards.

4. Tax collection and compliance

• Collect and remit state sales tax (4.5%) and tourism tax (1.5%) on short-term stays.
• Some booking platforms remit these taxes automatically; however, hosts remain responsible for ensuring accurate collection/remittance for all bookings and channels.

5. Insurance

• Standard homeowners policies generally exclude commercial short-term rental activity. Secure appropriate property and liability coverage (and business interruption if relevant).

6. Operations setup

• Establish guest screening, house rules, noise/parking management, and trash protocols to avoid code issues and neighbor complaints.
• Maintain complete records for licensing, tax filings, and safety compliance.

References: www.checkmaterentals.com/blog/south-dakota-short-term-rental-laws

Required Documents, Permits, Licenses, and Guidelines

State-level (South Dakota)

• Sales Tax License (SD Department of Revenue)
  • Purpose: Collect/remit state sales tax (4.5%) and tourism tax (1.5%) for stays under 28 days.
  • Documentation typically includes business/owner identification, property details.
• Lodging License (SD Department of Health)
  • Purpose: Ensure lodging properties meet health/safety standards.
  • Documentation may include floor plans, owner/operator information, safety certifications, and proof of compliance with sanitation and building requirements.

City/County (Hill City and Pennington County)

• Zoning confirmation (Planning & Zoning)
  • Required to verify the property is not in a residential zone for new STRs; for non-residential zones, confirm allowed uses and any additional local requirements.
• Bed-and-Breakfast operation confirmation (if applicable)
  • Confirm any local registration/inspection requirements and ensure compliance with state lodging standards and city ordinances.
• Licensing/Permitting
  • Current sources indicate residential zones are closed to new STRs; citywide permitting details for non-residential zones are not comprehensively documented in provided sources. Contact the city directly for the most current requirements and any application forms.

Guidelines and operational practices (recommended)

• Safety: Smoke detectors, carbon monoxide alarms, fire extinguishers, emergency exits, and clear house rules.
• Neighbor relations: Quiet hours, parking management, trash/recycling schedules, and immediate response protocols for complaints.

References: www.checkmaterentals.com/blog/south-dakota-short-term-rental-laws

Specific Regulations (Hill City, Pennington County, and South Dakota)

City of Hill City (Pennington County)

• New STRs are prohibited in all residential zoned areas within city limits (June 2022 citizen ballot initiative).
• Existing STRs in residential zones may continue only under current ownership; sale/transfer triggers cessation as an STR.
• Bed-and-breakfast operations remain permitted.
• Rentals for 28 days or more are not subject to the short-term rental ordinance.
• During the annual Sturgis Motorcycle Rally, state law allows any property to be used as a short-term rental, superseding local restrictions for that period.
• Neighboring concerns cited by the city include noise, trash, parking, trespassing, and rapid guest turnover in residential areas.
• Context: By 2022, nearly 10% of Hill City’s ~481 housing units were STRs, prompting policy intervention to preserve housing for residents.

Pennington County

• County-level rules are not detailed in the provided sources; enforcement of some complaints involves the Pennington County Sheriff’s Office per city reporting. Investors should consult the county for any additional requirements affecting unincorporated areas.

State of South Dakota

• Tax obligations: 4.5% state sales tax and 1.5% tourism tax on stays under 28 days; hosts must register with the SD Department of Revenue.
• Lodging License: Required from the SD Department of Health for lodging properties to ensure health and safety standards.
• State law allows any property to be used as a short-term rental during the Sturgis Motorcycle Rally.
• State policy has preserved local control; attempts to preempt local bans (e.g., House Bill 1149 in 2024) did not pass, preserving municipalities’ authority to regulate STRs.

References: www.dakotanewsnow.com/2024/03/10/short-term-rental-regulation-still-puzzle-south-dakota/ and www.checkmaterentals.com/blog/south-dakota-short-term-rental-laws

Contact Information (Local Authority in Charge of STRs)

Hill City Municipal Government (primary local authority)

• Phone: (605) 574-4284
• Address: Hill City Hall, 639 Main Street, Hill City, SD 57745
• Website: www.hillsd.gov (municipal site)
• Department: Planning & Zoning (for zoning confirmation and any local permit questions)

South Dakota Department of Revenue (tax licensing)

• Phone: (605) 773-3311
• Website: dor.sd.gov

South Dakota Department of Health (lodging license)

• Phone: (605) 773-3361
• Website: doh.sd.gov

Pennington County Sheriff’s Office (complaints/enforcement, as referenced by city)

• Phone: (605) 394-6115
• Website: www.pennco.org/sheriffs-office

References: www.dakotanewsnow.com/2024/03/10/short-term-rental-regulation-still-puzzle-south-dakota/ and verified city/county/state websites

Source Links and Attribution

• Primary local regulatory context and ordinance summary:

  • www.dakotanewsnow.com/2024/03/10/short-term-rental-regulation-still-puzzle-south-dakota/

• State-level licensing and tax obligations:

  • www.checkmaterentals.com/blog/south-dakota-short-term-rental-laws

• Municipal contact reference and Hill City overview:

  • www.hillsd.gov

Important note for investors: The city’s 2022 residential ban is decisive for new STRs in residential zones; because non-residential zone requirements and any citywide permit processes are not fully documented in the provided sources, contact the Planning & Zoning Department directly for the most current application forms, eligibility criteria, and inspection requirements before acquiring or converting property.