South Dakota Sales Tax Enforcement Actions Checklist

South Dakota Sales Tax Enforcement Actions

Checklist

Introduction

South Dakota requires businesses and specific individuals to collect and remit sales tax on taxable transactions. The South Dakota Department of Revenue initiates enforcement action when it determines that sales tax has not been properly collected, reported, or paid.

This process begins when the state identifies a potential compliance issue through audits, third-party reports, or filing discrepancies. Understanding how the state's sales tax enforcement process works can help you respond appropriately and avoid further complications.

What This Issue Means

A sales tax enforcement notice is an official communication from the Department of Revenue indicating that the state believes sales tax obligations have not been met. The enforcement action represents the state’s formal request for compliance and typically outlines what the state thinks is owed, the relevant time period, and the deadline for response.

Why the State Issued This or Requires This

South Dakota initiates enforcement actions when it identifies compliance gaps through audits of business records, mismatches in information reported by third parties such as credit card processors or marketplace providers, failure to file returns on time, or prior collection notices that went unaddressed. Ensuring that all applicable sales tax is collected and remitted in accordance with South Dakota law remains the state's primary goal.

What Happens If This Is Ignored

Ignoring a sales tax enforcement action typically results in the state escalating the matter. South

Dakota may pursue additional collection methods, including liens on business or personal assets, garnishment of bank accounts, or seizure of property through distress warrants. Delayed responses lead to increasingly significant penalties and interest, and additional administrative costs may be added to the original amount owed.

What This Does NOT Mean

Receiving a sales tax enforcement notice does not mean your business license will be automatically revoked or that criminal charges have been filed. An enforcement notice is the state’s allegation of what is owed, not a completed legal judgment.

Checklist: What to Do After Receiving a Sales Tax

Enforcement Notice

Step One: Gather and Review the Notice

Read the entire notice carefully, including all dates, amounts, and instructions. Identify the specific tax period or periods the state is referencing. Note the deadline for responding, which varies by notice type: 60 days from the date of a Certificate of Assessment, or 30 days for most other tax assessment notices. Keep the original notice and any supporting documents the state provided.

Step Two: Locate Your Business Records

Collect all sales records for the periods mentioned in the notice. Gather copies of sales tax returns you filed during that time, if any. Find records of all sales tax payments or remittances made to the state. Organize records chronologically to match the state’s time period exactly.

Step Three: Verify the State’s Claims

Compare your records to the amounts and time periods stated in the notice. Check whether you filed all required returns for the period in question and confirm whether you made all payments when they were due.

Step Four: Determine Your Response Type

Decide whether you agree with the enforcement notice or disagree with it. Do not delay this decision, as your response deadline also serves as your planning deadline.

Step Five: Prepare Your Written Response

Write a clear, factual letter responding to the enforcement notice. Include your business name, sales tax license number, and the date of the notice. State whether you agree or disagree with

each item in the notice. Organize any attached documents in the order they are mentioned in your letter.

Step Six: Compile Supporting Documentation

Make copies, not originals, of all relevant records you located in Step Two. Arrange documents in a logical order by date, by category, or by argument.

Step Seven: Submit Your Response

Review the notice for the specific address where responses should be sent. Confirm whether the state accepts electronic submissions or requires mail only. If mailing, use certified mail with a return receipt requested. Send your response before the deadline listed on the notice.

Step Eight: Document Your Submission

Keep a copy of your complete response and all documents you submitted. If mailed, save the certified mail receipt and return receipt when received.

Step Nine: Wait for the State’s Reply

The Department of Revenue will review your response, though South Dakota does not publish official timeframes for this process. Continue filing and paying current sales tax obligations as usual.

Step Ten: Respond to Follow-Up Notices

If the state requests additional information, provide it by the deadline stated. Save all correspondence from the state in a dedicated folder or file.

What Happens After This Is Completed

Once you submit your response, the Department of Revenue reviews your documentation and position. The state issues a written decision confirming the amount owed, modifying it, or dismissing the enforcement action.

Common Mistakes to Avoid

Missing the response deadline remains the most common error. Not responding to an enforcement notice by the date specified allows the state to proceed with collection action without further notice. Submitting incomplete records or records that do not clearly correspond to the state’s time period weakens your position and may require additional follow-up. Failing to retain copies of everything you submit makes it challenging to track what the state has received.

Continuing to file incorrectly while the enforcement action relates to how you have been reporting or paying sales tax suggests the issue is ongoing. Sending original documents to the state instead of copies leaves you without documentation if the state loses them. Mailing a response without certified mail or saving electronic confirmation receipts means you cannot prove you submitted it by the deadline.

Frequently Asked Questions

What if I cannot locate all my records for the period in question?

If records are missing, explain this in your response and provide any available documentation.

Contact the Department of Revenue directly to discuss options for your specific situation.

Can I pay the amount stated in the notice even if I disagree with it?

You may make payment while preserving your right to dispute the assessment by filing a written request for a hearing within 60 days from the date of the Certificate of Assessment per South

Dakota law. Consult with the Department of Revenue or legal counsel before making payment on a disputed assessment.

How long does the state usually take to review my response?

South Dakota does not publish official timeframes for reviewing enforcement responses.

Contact the department for status updates specific to your case.

What if I still disagree with the state’s final decision?

You may request an administrative hearing before the Secretary of Revenue if you believe the assessment is based on a mistake of fact or an error of law. The written request for hearing must be received by the Department no later than 60 days after the date on the Certificate of

Assessment.

Do I need to hire a tax professional or accountant to respond?

Many taxpayers respond independently using their own records. The choice depends on the complexity of the issue and your comfort level managing the process.

What if the enforcement notice includes penalties?

A penalty of 10% of the tax liability is assessed if a return is not received within 30 days after the month in which the return is due, with a minimum penalty of $10. If you believe the penalty is incorrect, include this in your response with a supporting explanation.

Can the state collect the amount owed while my response is under review?

South Dakota may initiate collection action during the review process if the state determines that immediate collection is necessary. Most enforcement cases allow time for the response process before aggressive collection begins.

What if I received an enforcement notice, but my business was inactive during that period?

Document your business status during the period in question, including closing date or dissolution records. Include this explanation in your response with supporting documentation.

Is there a statute of limitations on how far back the state can pursue sales tax?

The statute of limitations for sales tax assessment in South Dakota is three years from the date a return is filed. However, there is no statute of limitations if the taxpayer was unlicensed during the period, filed a fraudulent return, failed to file a return, or had fraudulent intent to evade taxes.

Closing

Your primary responsibility is to respond promptly and in full to the notice by the stated deadline.

Gather your records, prepare a factual response, and submit it with copies of supporting documentation.

Facing State Tax Enforcement Action?

If you’ve received a notice related to sales tax or payroll tax enforcement, and aren’t sure how to respond, our team can help you understand your options and next steps.