South Dakota Sales Tax Penalties & Interest Checklist
Introduction
Sales tax penalties and interest in South Dakota are charges added to unpaid or late sales tax obligations. If your business collects sales tax but fails to remit it on time, or if you owe sales tax and do not pay by the due date, the South Dakota Department of Revenue will assess penalties and interest on the amount owed.
Understanding how these charges accumulate and what triggers them is essential, as ignoring them can allow your debt to grow and may result in enforcement action. This checklist explains what penalties and interest are, why they are applied, and what steps to take if you are facing them.
What This Issue Means
Sales tax penalties and interest are separate financial charges imposed by South Dakota when sales tax obligations are not met on time or in whole. Penalties are punitive charges calculated as a percentage of unpaid tax, while interest accrues at a fixed monthly rate on the unpaid balance.
Why the State Issued This or Requires This
South Dakota applies penalties and interest to encourage timely payment and tax compliance with sales tax filing and remittance requirements. The state imposes these charges automatically when tax payments are late or incomplete.
Tax rates for penalties and interest are established by South Dakota statute under SDCL
Chapter 10-59, not by discretionary administrative practices. The penalty structure serves as a deterrent to non-compliance under tax laws, while interest compensates the state for the time value of unpaid tax revenue.
What Happens If This Is Ignored
If you do not address penalties and interest, the unpaid balance continues to grow as interest accrues monthly on any outstanding tax. The state may pursue tax collection actions, including wage garnishment, bank levies, or the seizure of business assets.
What This Does NOT Mean
The assessment of penalties and interest does not mean your sales tax account has been referred to criminal prosecution. It also does not mean the state has automatically filed a lien against your property or frozen your bank account.
Checklist: What to Do After Receiving a Notice of
Penalties and Interest
Step 1: Gather and Review the Notice
Locate the official notice from the South Dakota Department of Revenue. Read the entire notice carefully, including all sections and any attachment pages. Note the notice date, the tax period covered, and the amount of penalties and interest assessed. Identify the due date listed for any response or payment action.
Step 2: Verify the Tax Period and Amount
Compare the tax period on the notice to your sales tax filing records. Review your filed sales tax returns for the periods mentioned.
Step 3: Understand the Penalty and Interest Breakdown
South Dakota assesses a penalty of 10% of the tax liability if a return is not received within 30 days after the month in which the return is due, with a minimum penalty of $10. Interest charges accrue at 1% per month or a partial month on any past-due tax until the tax is paid in full.
The minimum interest charge for the first month is $5. Record the calculation dates and the final penalty and interest amounts, noting that failure to file penalties apply when returns are not submitted on time.
Step 4: Determine if There Are Extenuating Circumstances
Review your business records from the tax period to identify any unusual circumstances.
Document any events that may have prevented timely filing or payment, such as business interruption, staff illness, or system failure that affected your ability to file returns.
Step 5: Contact the Department of Revenue
Locate the contact phone number on your notice, typically listed at the bottom. Call during business hours to confirm receipt of the notice and ask for clarification. Ask specifically what penalties are included and confirm the interest rate applied to your account. Request information about any available payment plan or relief options, including whether failure to pay fines can be reduced.
Step 6: Request Written Clarification if Needed
If the notice is unclear or you do not understand a specific charge, submit a written request for clarification. Send the request to the address listed on your notice, and inquire whether the assessment includes all applicable tax obligations.
Penalties and interest on unpaid sales
tax and use tax are serious obligations that grow over time if left unaddressed.
Step 7: Review Your State Payment Plan Options
Ask the Department of Revenue whether a payment plan is available for your balance, and explore payment options to settle your account. Under South Dakota law, interest continues to accrue on any unpaid tax balance at the statutory rate until the tax is paid in full.
Step 8: Explore Penalty Relief or Abatement Options
Contact the Department of Revenue to ask if your situation qualifies for penalty relief under tax laws. South Dakota statute SDCL 10-45 allows the Secretary of Revenue to reduce or eliminate penalties for reasonable cause shown.
Ask what documentation the state requires to consider penalty relief for late filing fees or failure to file penalties. Submit any required documentation by the state-provided deadline.
Step 9: Prepare Your Response or Payment
Decide whether you will pay the balance in full, set up a payment plan, or request relief. If paying in full, obtain the exact payment amount and approved payment options from the state, ensuring your payment covers all state sales tax and use tax obligations.
Step 10: Submit Your Response
If paying, submit your payment in accordance with the state's instructions and filing requirements. If requesting a plan or relief, submit your application and supporting documents by the deadline, addressing any filed return corrections needed.
Step 11: Document All Correspondence
Create a file for this case with copies of all notices, letters, and communications. Save copies of all documents you submit to the state, including records related to tax collection disputes or tax audit inquiries.
- Do not ignore the response deadline on your notice or filing requirements, as the state
- Always include your sales tax account number or account identification on any payment,
- Respond promptly if the state sends additional notices or requests for information, as
- Submit all documents the state requires if you request penalty relief for failure to pay
- Save all correspondence, notices, and proof of submission, as you may need these
- State enforcement notices and responses
- Sales tax audits, assessments, and collections
- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
Step 12: Follow Up if You Do Not Hear Back
If the state does not respond within the stated timeframe, follow up in writing. Reference your original submission and include a copy of your proof of submission, particularly if your case involves a tax audit or filed return corrections.
Common Mistakes to Avoid sets specific dates for paying, requesting relief, or submitting additional information. as payments without proper identification can cause processing delays and affect tax collection records. failure to respond may result in tax collection action or a tax audit. penalties, since incomplete applications may be rejected, and you will need to resubmit. records if there are disputes, delays, or a state tax audit.
Frequently Asked Questions
How much are South Dakota sales tax penalties?
South Dakota imposes a penalty equal to 10% of the tax liability if a return is not received within
30 days after the month in which the return is due. The minimum penalty is $10 and is assessed even if no tax is due, covering both sales tax and use tax obligations.
What is the South Dakota sales tax interest rate?
South Dakota charges interest at 1% per month or partial month on unpaid tax, a rate that has been in effect since July 2015. For intentional evasion, a higher rate of 1.5% per month applies.
The minimum interest charge for the first month is $5.
Can I get penalties removed entirely?
South Dakota allows penalty relief when reasonable cause is shown under tax compliance standards. The Secretary of Revenue may reduce or eliminate penalties under SDCL 10-45.
What payment methods does South Dakota accept?
The Department of Revenue accepts various payment options, which are typically listed on your notice or available on the state's website. Contact the state or check your notice for approved payment methods.
Closing
Penalties and interest on unpaid sales tax are serious obligations that grow over time if left unaddressed. You have options: you can pay in full, arrange a payment plan, request clarification, or explore relief opportunities.
Taking prompt action stops assumptions and gives you clear information about your situation.
Keep all documentation, meet deadlines, and respond to any state requests.
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.
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