Unlike most of the U.S. states where unemployment benefits are actually taxed, South Dakota is pretty friendly. The Mount Rushmore State doesn’t tax your unemployment compensation. Plus, there’s virtually no income tax in South Dakota.
Things get messy when you have to deal with South Dakota’s sales tax. The state imposes a 4.5 percent levy, and it gets even worse as localities can add as much as 4.5 percent to it. The information provided by the Tax Foundation says that the average combined rate in South Dakota is 6.4 percent. So, it’s not THAT bad, comparing it with other states.