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

EXPLICIT ANSWER: Yes, short-term rentals are currently allowed in Spearfish, SD. The City of Spearfish does not currently regulate short-term rentals, which means there are no specific permits, licenses, or restrictions in place at the city level as of this writing. This creates a unique opportunity for STR investors in a market with growing demand and minimal regulatory barriers.

However, this regulatory landscape is evolving rapidly. The city has formed a Short-Term Rental Task Force that has been actively studying the issue since early 2024, and new regulations could be implemented in the future. With STR listings growing from approximately 108 in 2022 to nearly 353 as of September 2024, the city is closely monitoring the situation and considering various regulatory frameworks ranging from "light regulation" to potential bans.

How to Start a Short-Term Rental Business in Spearfish

Starting an STR business in Spearfish follows a straightforward process given the current lack of city-level regulations:

Step 1: Property Due Diligence

• Verify zoning compliance: Confirm your property is zoned for short-term rental use (typically residential or commercial zones allow STRs)
• Check HOA restrictions: Many subdivisions and condo communities limit or prohibit STRs through covenants, bylaws, or rules
• Review county regulations: If the property is outside city limits, Lawrence County zoning laws apply

Step 2: Business Formation and Tax Registration

• Register with South Dakota Department of Revenue: Required for collecting and remitting state sales tax and tourism tax
• Consider business structure: Form an LLC or other business entity if desired for liability protection
• Obtain EIN: Get a federal employer identification number for tax reporting

Step 3: Property Preparation

• Ensure safety compliance: Install working smoke and CO detectors, fire extinguishers, and clear egress routes
• Prepare guest amenities: Furnish the property appropriately for short-term stays
• Set up utility services: Ensure reliable internet, cable/satellite TV, and essential utilities

Step 4: Marketing and Management Setup

• Create listings: List on Airbnb, VRBO, and other platforms
• Establish pricing strategy: Consider seasonal variations in this tourist destination
• Arrange cleaning and maintenance: Contract reliable local services for turnover and repairs
• Secure insurance: Obtain STR-specific insurance coverage, as standard homeowners policies often exclude short-term rental activity

Required Documents, Permits, Licenses, and Guidelines

Current Requirements (City-Level)

None currently required. As of this writing, Spearfish does not require:

• Short-term rental permits or licenses
• Safety inspections for STRs
• Occupancy permits
• Business registration for STRs at city level

State-Level Requirements

Tax Registration and Collection:

• Register with South Dakota Department of Revenue for sales tax and tourism tax collection
• Collect and remit applicable taxes on all short-term stays

County Requirements (For Properties Outside City Limits)

Zoning Compliance:

• Confirm allowed use for short-term rentals in Lawrence County zoning
• Obtain any required zoning permits or special exceptions

Federal Requirements

• Tax reporting: Report STR income on Schedule E of federal tax return
• Business registration: If operating as a business entity, register with South Dakota Secretary of State

Recommended Guidelines (Best Practices)

• Good neighbor policy: Establish clear house rules regarding noise, parking, and guest behavior
• Emergency procedures: Post emergency contact information and evacuation procedures
• Local contact: Designate a local contact person available 24/7 for guest issues
• Community engagement: Participate in local STR community groups and stay informed about regulatory changes

Specific Regulations for Short-Term Rentals

City of Spearfish Regulations

Current Status: No specific regulations in place. However, the city is actively studying potential regulations that could include:

Potential Future Regulations Under Consideration:

• Tier 1: No regulation (current approach)
• Tier 2: "Regulation light" - licensing process
• Tier 3: Moderate regulation - cap on vacation rental units and licensing process
• Tier 4: Heavy regulations - elements of lower tiers plus zone restrictions
• Tier 5: Complete ban on short-term rentals

Zoning Compliance Required:

• Properties must comply with existing zoning ordinances
• Short-term rentals typically allowed in residential and commercial zones
• Check specific zoning requirements for your property location

Lawrence County Regulations

For properties outside city limits:

• Review Lawrence County land-use code for short-term rental regulations
• Confirm permitted uses for your specific zoning classification
• Obtain any required zoning permits or special use exceptions

State of South Dakota Regulations

Tax Obligations:

• State Sales Tax: 4.2% on short-term lodging charges
• Tourism Tax: 1.5% on short-term accommodations
• Municipal Taxes: Cities may impose additional taxes (Spearfish: 2% city sales tax plus 1% municipal hospitality tax on lodging under 28 days)

Total Tax Burden: Approximately 8.7% on lodging charges in Spearfish (varies by specific location)

Key Points:

• South Dakota does not provide a statewide definition for short-term rentals
• Many local governments treat stays under 30 days as transient lodging
• No standalone statewide STR license required
• Booking platforms may collect and remit certain taxes automatically, but verify responsibilities

Contact Information for Local Authority

City of Spearfish - Planning & Zoning Department

Primary Contact for STR Questions:

• Email: shorttermrentalinfo@cityofspearfish.com
• Website: www.spearfish.gov/853/Short-Term-Rentals

Physical Address: City Hall 625 North 5th Street Spearfish, SD 57783

Office Hours:

• Monday - Thursday: 8 a.m. - 4 p.m.
• Friday: 8 a.m. - 3 p.m.

Additional Contacts:

• Planning & Zoning Department: Check city website for specific phone numbers
• Mayor & Council: For public comment on potential regulations

Lawrence County Planning Department

For properties outside city limits:

• Website: codelibrary.amlegal.com/codes/lawrencecounty/latest/lawrencecty_sd_land/0-0-0-758
• Contact: Lawrence County Courthouse or county planning office

South Dakota Department of Revenue

For tax registration and compliance:

• Website: dor.sd.gov/businesses/taxes/sales-use-tax/
• Tourism Tax Info: dor.sd.gov/businesses/taxes/tourism-tax/

Links to Source Pages

Official City Resources

• City of Spearfish - Short-Term Rentals Page: www.spearfish.gov/853/Short-Term-Rentals
• City of Spearfish - Ordinances: codelibrary.amlegal.com/codes/spearfish/latest/overview
• City of Spearfish - Zoning Ordinance: codelibrary.amlegal.com/codes/spearfish/latest/spearfish_sd/0-0-0-5554
• City of Spearfish - City Sales Tax: www.cityofspearfish.com/199/City-Sales-Tax
• OpenGov Application Portal: spearfishsd.portal.opengov.com/

County Resources

• Lawrence County Land-Use Code: codelibrary.amlegal.com/codes/lawrencecounty/latest/lawrencecty_sd_land/0-0-0-758
• Lawrence County GIS Map: beacon.schneidercorp.com/Application.aspx?App=LawrenceCountySD&PageType=Map

State Resources

• South Dakota Department of Revenue - Sales & Use Tax: dor.sd.gov/businesses/taxes/sales-use-tax/
• South Dakota Department of Revenue - Tourism Tax: dor.sd.gov/businesses/taxes/tourism-tax/
• South Dakota Secretary of State: For business registration

Additional Resources

• Visit Spearfish: visitspearfish.com/about-visit-spearfish-inc
• AirDNA Market Data - Spearfish: www.airdna.co/vacation-rental-data/app/us/south-dakota/spearfish/overview
• South Dakota Short-Term Rental Association: sd-stra.com/
• Host Insurance Information: www.investopedia.com/articles/insurance/120816/does-your-homeowners-insurance-cover-airbnb.asp

Investment Considerations and Risk Factors

Regulatory Risk

The primary risk for STR investors in Spearfish is potential future regulation. The city has been actively studying the issue and could implement any of the five regulatory tiers being considered. This could affect:

• Required permits and licensing fees
• Safety inspections
• Occupancy limits
• Zoning restrictions
• Tax obligations

Market Dynamics

• Strong seasonal demand driven by Black Hills tourism and university events
• Growing inventory (108 STRs in 2022 to 353+ in 2024) may affect pricing power
• Mid-range occupancy rates (low-to-mid 50% range) and ADRs in low-to-mid $200s to $300s

Operational Considerations

• Ensure compliance with all tax obligations (approximately 8.7% total tax burden)
• Verify HOA rules before purchasing
• Secure appropriate insurance coverage
• Plan for seasonal revenue variations

Due Diligence Checklist

1. Verify current city and county regulations
2. Review HOA covenants and bylaws
3. Confirm zoning compliance
4. Register for applicable taxes
5. Obtain STR-specific insurance
6. Plan for management and maintenance
7. Monitor city council meetings for regulatory updates

This regulatory landscape presents both opportunity and risk for STR investors. The current lack of regulation allows for immediate entry into the market, but investors should build flexibility into their financial projections to account for potential future regulations that may be implemented.