South Dakota Freelance Contract Review
South Dakota is one of the few states where a freelancer may need to charge sales tax on services. Its tax applies to goods and a broad range of services, so the tax clause in a South Dakota client contract is not a formality. The state also has a specific non-compete statute, SDCL 53-9-11, which allows restrictions of up to two years within the employer's business area. There is no freelance payment statute and no personal income tax.
Non-compete / non-solicit in South Dakota
Non-competes generally enforceable if reasonable
Non-competes and non-solicits for freelancers in South Dakota
Enforceable for up to two years within the area where the employer does business. Under SDCL § 53-9-11.2 a non-compete is voidable by listed health care practitioners (contracts from July 1, 2023) and by community services providers for people with developmental disabilities (contracts from July 1, 2026).
Client contracts often include a non-solicitation clause, sometimes an overbroad one that tries to bar you from an entire industry. Whatever South Dakota allows, narrow it to the client's own staff and named customers, for a short period, before you sign.
Freelancer payment protection in South Dakota
South Dakota does not yet have a dedicated freelance payment-protection law (New York, Illinois and California have statewide laws), so your contract is your main protection against late or non-payment. Insist on a deposit, milestone payments tied to dates, and a kill fee if the client cancels.
Who owns your work
Under the federal Copyright Act, work is not automatically “work for hire” for an independent contractor, it takes a written assignment. Read whether the contract assigns only the final deliverables or reaches your concepts, drafts, and pre-existing tools, and add a carve-out for the reusable methods you bring to every project.
Do South Dakota freelancers charge sales tax?
Often, yes. South Dakota's gross receipts and sales tax reaches a wide range of services, not just goods. House Bill 1137 cut the state rate from 4.5 percent to 4.2 percent from July 1, 2023 through June 30, 2027, after which it is scheduled to return to 4.5 percent unless lawmakers act. Cities can add their own rates.
Check with the South Dakota Department of Revenue whether your service is taxable and register if so. Then make sure the contract says fees are "plus applicable sales tax".
How does SDCL 53-9-11 fit a freelance agreement?
The statute allows an employee to agree not to compete for up to two years within the area where the employer does business. It is framed around employment, so a client restriction on an independent contractor does not fit it neatly and is judged on general reasonableness.
Whatever the legal route, two years is the ceiling South Dakota sets even for employees. A freelance restriction should be far shorter and tied to the client's own customers.
Is there a South Dakota freelance payment law?
No. South Dakota has no statute setting payment deadlines for independent contractors, so write them in: a deposit, due dates, late interest and a right to pause work. If sales tax applies to your service, show it as a separate invoice line so a client cannot treat it as part of your fee.
South Dakota sources checked 2026-10-09: Sales Tax Institute, South Dakota temporarily lowers sales tax rate. Laws change; confirm the current rule before relying on it.
What ClauseAudit checks in a South Dakota freelance contract
- Non-compete / non-solicit enforceability under South Dakota law
- IP assignment and work-for-hire scope, with a pre-existing-tools carve-out
- Payment terms, deposit, milestones, and a kill fee
- Unlimited "reasonable" revisions with no cap
- Payment gated on subjective client approval
- Liability caps and indemnification
South Dakota freelance contract FAQ
Can a client make me sign a non-compete in South Dakota?
In South Dakota, a non-compete or non-solicit can be enforceable if it is reasonable in duration, geography, and scope. Enforceable for up to two years within the area where the employer does business. Under SDCL § 53-9-11.2 a non-compete is voidable by listed health care practitioners (contracts from July 1, 2023) and by community services providers for people with developmental disabilities (contracts from July 1, 2026). For a freelancer whose business spans an industry, a broad restriction is worth narrowing before you sign.
Does South Dakota protect freelancers from late or non-payment?
As of October 2026, South Dakota does not have a dedicated "Freelance Isn't Free" style payment-protection law (New York, Illinois and California have statewide laws). So your contract's payment terms, milestones, deadlines, a kill fee, are your main protection. Make them specific.
Who owns the work I create for a South Dakota client?
Under US copyright law, work is not automatically "work for hire" for an independent contractor, it requires a written assignment. Read whether the contract assigns only the final deliverables or sweeps in your concepts and pre-existing tools, and add a carve-out for your reusable methods. This is federal law and applies in South Dakota.
Does a South Dakota non-compete apply to an independent contractor?
South Dakota is one of 34 jurisdictions where a non-compete is generally enforceable if reasonable in duration, geography and scope. Enforceable for up to two years within the area where the employer does business. Under SDCL § 53-9-11.2 a non-compete is voidable by listed health care practitioners (contracts from July 1, 2023) and by community services providers for people with developmental disabilities (contracts from July 1, 2026). Contractor restraints are often argued differently from employee ones, since the bargain and the bargaining power differ, so how you are actually engaged matters as much as the label on the agreement.
If the restriction in my South Dakota agreement is too broad, what happens?
Courts may rewrite an overbroad restriction to something reasonable. That cuts against you: an employer has little to lose by drafting wide, because a court can pare the clause back rather than discard it. Negotiating the wording before signing matters more here than in states where an overbroad clause simply fails.
Does it matter which state's law the agreement names?
It can, because South Dakota's neighbours do not all agree: Minnesota (void), North Dakota (void), Wyoming (limited). Which law applies turns on the governing-law and venue clauses and on where the work is actually done, so those two clauses are worth reading before signing a freelance contract.
What sales tax rate applies to South Dakota freelance services after mid-2027?
Under House Bill 1137, the state rate is 4.2 percent from July 1, 2023 through June 30, 2027, and it is scheduled to go back to 4.5 percent from July 1, 2027 unless the Legislature changes it. Local municipal taxes come on top. For a contract running past mid-2027, say taxes will be charged at the applicable rate.
Who pays South Dakota sales tax on my freelance services?
The tax is typically collected from the client and remitted by you as the seller. If your contract is silent or says fees include all taxes, you may end up paying it from your fee. Add a clause stating that prices exclude sales tax, which will be added to invoices where the service is taxable.
Have a South Dakota client contract to sign?
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How neighbouring states treat restrictive covenants
Nationally: 4 jurisdictions treat employee non-competes as void, 13 allow them only in limited circumstances, 34 generally enforce them if reasonable.
South Dakota rules summarized as of October 2026; laws change and localities may add their own. This is automated educational information, not legal advice. ClauseAudit verifies current South Dakota law when you run your contract, and you should confirm anything critical with a qualified attorney.