South Dakota Sales Tax License Revocation / Business Shutdown Checklist

South Dakota Sales Tax License Revocation /

Business Shutdown Checklist

Understanding Sales Tax License Revocation

A sales tax license revocation in South Dakota means the Department of Revenue has suspended or canceled your business's authority to collect and remit sales tax. Once revoked, you cannot legally conduct sales subject to state tax.

Upon revocation, the state issues a formal notice terminating your licensing status and typically provides the reason and any amounts owed. When businesses fail to meet statutory filing or payment obligations, the Department of Revenue takes this action. It uses this enforcement tool to ensure compliance with tax laws and protect the revenue collection system.

Common Triggers for Revocation

South Dakota law permits the Department of Revenue to revoke your license for specific violations. Failing to file required returns on time or failing to pay taxes owed can result in revocation.

Repeated violations of sales tax regulations or failure to respond to state notices or correspondence can also lead to revocation. This administrative action helps the Department of

Revenue maintain compliance among all licensed businesses.

Criminal Penalties and Enforcement Actions

Engaging in business as a retailer after the Department of Revenue has revoked your license is a Class 6 felony under state law. This criminal offense carries penalties of up to 2 years' imprisonment in a state correctional facility and a fine of up to $4,000.

Operating without ever obtaining a license is a Class 1 misdemeanor, with lesser penalties.

Revocation is an administrative action that requires prior notice and opportunity for a hearing, and it does not automatically trigger criminal charges unless you continue operating afterward.

Immediate Steps After Receiving a Revocation Notice

You must stop all sales activity subject to South Dakota sales tax immediately upon receiving a revocation notice. Notify any staff or employees that the license is no longer valid and remove any signage or marketing materials that reference your license number.

Contact the Department of Revenue at the phone number listed on your revocation notice and ask to speak with someone in the Sales and Use Tax section. Provide your business name, license number, and the date you received the notice during this call. Ask for a detailed explanation of what specific tax periods or obligations led to revocation and whether there are unpaid tax amounts, penalties, or interest outstanding.

Gathering Required Documentation

Collect all sales tax returns filed in the past three years, as state law requires businesses to preserve records for not less than three years from the date returns are filed. Locate bank statements, sales records, and receipts related to taxable sales during this period.

Gather any prior correspondence with the Department of Revenue, including unpaid tax assessment notices or payment demand letters. Organize records chronologically so you can explain the history of your tax compliance to state officials and make copies of all documents while keeping originals in a safe place.

Understanding Your Financial Obligations

Ask the Department of Revenue for an itemized statement of all amounts owed, including the breakdown of original tax debt, penalties, and accrued interest. Verify this amount against your own records to confirm accuracy and identify any discrepancies.

Appeal and Reinstatement Options

South Dakota administrative procedures allow certain licensing decisions to be appealed, though no specific timeframe for processing appeals appears in the state's published guidance.

The notice you receive should indicate whether appeal rights exist and the applicable deadline.

Visit the official South Dakota Department of Revenue website at dor.sd.gov and look for sections about appeals or reinstatement procedures. If you intend to appeal, collect evidence that supports your position and prepare to explain what corrective actions you have taken.

Submitting Your Appeal or Reinstatement Request

Submit your appeal or reinstatement request via certified mail, return receipt requested, to verify delivery and maintain proof of submission. Include your name, business name, and license number in all correspondence.

Explain specifically why you believe the action was incorrect or improper if filing an appeal, or describe what steps you have taken to resolve the issues if requesting reinstatement. Provide documentation of corrective action if possible, such as proof of payment or filed returns, and keep copies of your request and any supporting documents.

What Revocation Does Not Mean

A revoked license does not automatically dissolve your business or eliminate your remaining tax obligations. Revocation does not mean criminal charges have been filed, though continued operation without a valid license could lead to criminal prosecution.

Consequences of Continued Non-Compliance

If you ignore a revoked license and continue to operate, the state may pursue additional enforcement actions beyond criminal prosecution. Additional penalties and interest on unpaid balances can be assessed, and collection lawsuits may be filed to recover amounts owed.

The Department of Revenue may place liens against business property, and unpaid tax debt can be referred to the state's collection agency. In cases involving corporate ownership structures, enforcement actions may target corporate officers, member-managers of limited liability companies, or partners of partnerships who control or supervise tax filing responsibilities.

Record Retention Requirements

State law requires you to maintain all records about sales or use tax transactions for not less than three years unless the Secretary of Revenue authorizes earlier destruction in writing. Keep federal income tax returns for the business, summary accounting records, sales invoices, purchase invoices, and exemption certificates for any claimed exemptions.

Moving Forward After Revocation

If the Department of Revenue reinstates your license, confirm that it is active and request a new certificate or proof of active status. Resume only those sales activities covered by your reinstated license and file all overdue returns immediately if you have not already done so.

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.