Understanding the South Dakota Tax Collection Process for Businesses

South Dakota’s tax system differs significantly from that of most other states. The state does not impose a personal or corporate income tax. Instead, it relies heavily on sales tax, property tax, contractor’s excise tax, and other consumption-based revenue streams. This structure emphasizes accurate tax reporting and timely payments from individuals, businesses, and other taxable entities operating within the state.

Understanding how the South Dakota Department of Revenue enforces tax compliance is essential for anyone subject to state taxes. The collection process can involve official notices, strict deadlines, accumulating penalties, and, in some cases, enforcement actions such as tax liens, wage garnishments, or distress warrants. Knowing your obligations—and how to respond to notices—can help you avoid unnecessary stress, financial strain, and further legal complications.

This guide is intended for residents, business owners, tax-exempt organizations, and contractors seeking to understand South Dakota’s tax collection process. Whether addressing an outstanding balance, exploring your rights as a taxpayer, or ensuring continued compliance, this resource offers a practical, step-by-step overview to help you navigate the system effectively.

Overview of South Dakota’s Tax System

South Dakota’s tax system is unique among U.S. states. It does not levy a personal or corporate income tax, which means the state relies heavily on other forms of taxation to fund essential government functions and services.

Primary Revenue Sources

The state’s revenue is primarily generated through the following taxes:

Sales and Use Tax: South Dakota imposes a 4.2% base sales tax on most goods and services, with additional municipal tax rates that can increase the total to over 6% depending on location. The tax rate applies to the purchase price of tangible personal property and certain services, including products transferred electronically, eating establishments, and lodging accommodations.
Property Taxes: Local governments—not the state—administer property taxes. These taxes fund public schools, counties, and municipalities. The value of real estate and specific personal property determines the tax amount due.
Excise and Special Taxes: South Dakota collects a 4% vehicle excise tax on motor vehicle purchases, as well as other levies such as
- Alcohol sales tax
- Tourism or hotel occupancy taxes
- Bank franchise and gross receipts taxes
- Select contractors’ excise taxes on construction services

No Income Tax, Aggressive Collections

Without income-based taxation, the South Dakota Department of Revenue relies on substantial compliance and enforcement mechanisms to meet tax obligations. Businesses and individuals must file returns accurately, obtain the correct tax license, and pay promptly to avoid penalties.

Agencies Involved in Collection

South Dakota Department of Revenue (DOR): Oversees tax collection, licensing, audits, and enforcement.
County Treasurers: Manage property tax billing and collection.
Local Municipalities: May impose additional taxes and handle enforcement within their jurisdiction.

The tax system emphasizes consumption, ownership, and property, so anyone engaged in retail sales, rental, or service-based transactions in South Dakota should understand their obligations to remain compliant with state tax laws.

When and Why Tax Debt Becomes Collectible

A tax liability becomes collectible in South Dakota when a taxpayer fails to meet their obligation to file and pay the correct amount of tax by the due date. This applies to individuals and businesses involved in sales, services, rentals, or other taxable transactions.

Common Triggers for Collection

Several events can trigger tax debt collection:

Late or Missing Tax Returns: When a taxpayer fails to file a required return by the due date, the South Dakota Department of Revenue (DOR) may issue an estimated assessment based on prior activity or industry norms.
Underpayment of Taxes Owed: If a return is filed but the payment is not made in full, the outstanding amount becomes immediately collectible.
Audit Findings or Corrections: If the DOR conducts an audit or discovers errors in a previously submitted return, it may assess additional tax due, including gross receipts that were formerly underreported.
Expired Exemptions or Registrations: If an exempt organization or resale certificate holder fails to renew or misuses its exemption, previously exempt sales may become taxable.

When Does Tax Debt Become Enforceable?

A debt typically becomes enforceable:

On the effective date following a missed filing or payment deadline,
After the DOR issues a notice of assessment, or
When audit results are finalized, they reveal unreported or underreported taxes.

Interest begins to accrue from the original due date, and penalties may be added if the DOR determines negligence or willful disregard of tax laws.

Consequences of Inaction

If a taxpayer fails to resolve the issue, the DOR may take the following actions:

File liens against property
Garnish employee wages
Seize business or personal assets
Initiate legal proceedings based on South Dakota’s adoption of applicable sections of the Internal Revenue Code.

Proactively filing timely returns, reviewing account status, and addressing discrepancies can help taxpayers avoid entering the collection phase altogether.

Understanding the Notice and Demand Process

When a tax bill is due, the South Dakota Department of Revenue (DOR) sends a notice and demand letter to start the official collection process. SDCL 10-59 requires this step. If the problem isn't resolved, this notification is the first step in enforcement actions.

What the Notice Includes

The notice and demand letter contains key details that taxpayers need to understand their situation:

Tax Type and Amount Due: Specifies the original tax amount, interest, and accrued penalties.
Deadline for Payment: Indicates the date the full payment must be received to avoid enforcement.
Legal Warning: If the debt remains unpaid, further action—such as liens, levies, or garnishments—may occur.
Instructions for Response: This section provides contact details for the DOR and instructions on how to dispute the amount or set up a payment arrangement.
Reference to Authority: Cites relevant South Dakota tax laws, typically under SDCL 10-59-10 or 10-59-13, which govern how tax debts are enforced.

Timeline for Taxpayer Action

The DOR typically allows taxpayers to respond 30 days from the mailing date of the notice. During this period, individuals and businesses can:

Pay the full balance.
Apply for a payment plan or request relief.
Submit supporting documents to correct or challenge the assessment.
Request a formal hearing to dispute the liability.

Why This Notice Matters

Failing to act on the notice may result in immediate enforcement actions, including:

Filing of tax liens on personal or business property,
Seizure of accounts or wages,
The case may be assigned to legal collections.

Early communication with the DOR can assist anyone receiving a notice in avoiding further penalties and provide access to resolution options, particularly for businesses, contractors, or individuals experiencing financial hardship.

Key Enforcement Tools Used by the South Dakota DOR

The South Dakota Department of Revenue (DOR) may initiate enforcement actions if a taxpayer does not respond to a notice and demand. These tools are designed to recover unpaid taxes efficiently and may affect personal and business assets.

Tax Liens: Actions by the South Dakota Department

A tax lien is a legal claim the state places on a taxpayer’s property—including real estate and tangible personal property—to secure payment of delinquent tax liability.

Filing Process: The DOR files a lien with the Register of Deeds in the county where the taxpayer owns property. This document becomes a public record and attaches to all current and future assets.
Impact of a Lien
- Lower your credit rating,
- Hinder the sale or refinance of property,
- Take priority over subsequent creditor claims,
- Extend beyond individual ownership to jointly held assets.
How to Remove a Lien: According to SDCL 10-59-30, the lien must be released within 30 days after the full balance, including interest and penalties, is paid. A corrected lien release will also update the public records if an error occurs.

Wage Garnishments

Wage garnishment allows the DOR to collect unpaid tax directly from a taxpayer’s paycheck by requiring their employer to withhold a portion of earnings.

Process Overview: The DOR sends a garnishment notice to the employer, legally obligated to comply.
Limits on Garnishment: South Dakota law generally limits garnishment to 20% of a person’s disposable income, although different rules may apply based on the type of debt.
Employer Responsibilities
- Begin withholding by the effective date listed.
- Continue withholding until the debt is satisfied or the DOR releases the order.
- Avoid retaliating against an employee for a single garnishment.

Bank Levies

A bank levy authorizes the DOR to seize funds from a taxpayer’s bank account to cover outstanding tax liability.

How It Works: The DOR issues a levy to the financial institution, freeing the account.
Holding Period: The funds are frozen for a short period—typically 21 days—to allow the taxpayer to respond or demonstrate financial hardship.
Seizure of Funds: If no action is taken, the bank sends the funds directly to the DOR. Multiple levies may occur if the debt is not fully satisfied.

Property Seizure and Sale

In severe cases, the DOR can seize real or personal property and sell it to recover unpaid taxes.

Legal Basis: Under SDCL 10-59-13, the Secretary of Revenue may issue a distress warrant, directing a sheriff to seize and sell property.
Sheriff’s Role: Upon receiving the warrant, the sheriff locates and seizes the taxpayer’s assets, then conducts a public auction.
Types of Property Affected
- Motor vehicles
- Business equipment or inventory
- Rental property or other real estate
Protections and Oversight: A division director or higher authority must approve the seizure, and the taxpayer must be notified before the sale. All proceeds are applied to the outstanding balance, with excess funds refunded if applicable.

The DOR’s enforcement powers are broad, but they follow legal procedures. If you’re at risk of enforcement, acting quickly can help avoid aggressive collection measures and protect your ownership rights.

Taxpayer Rights During Collection

Even as the South Dakota Department of Revenue (DOR) exercises its authority to collect unpaid taxes, taxpayers are protected under a formal set of legal rights. These protections are outlined in the South Dakota Taxpayers’ Bill of Rights and codified in SDCL 10-59.

Core Taxpayer Rights

South Dakota law provides the following key rights during the tax collection process:

Right to Notice: Taxpayers must receive written notification before audits, assessments, or collection actions begin.
Right to Appeal: Individuals and businesses can appeal tax assessments through administrative hearings and, if necessary, through the circuit or state supreme court.
Right to Confidentiality: All information submitted to the DOR, including account details and address information, is protected under privacy statutes.
Right to Courteous and Prompt Service: Taxpayers are entitled to clear, respectful communication from DOR staff and timely responses to inquiries.
Right to Lien Removal: After a tax debt is paid in full, taxpayers have the right to a lien release within 30 days (SDCL 10-59-30). The department must also correct filing errors.
Right to Clear Information: DOR correspondence must use plain language so taxpayers can understand the laws and procedures that apply to them.
Right to Rely on Written Advice: If a taxpayer receives incorrect written guidance from the DOR and reasonably relies on it, they may not be penalized (SDCL 10-59-27).
Right to Fair Collection Practices: Collection quotas cannot incentivize DOR staff, and actions must follow due process (SDCL 10-59-29).

Where These Rights Are Found

These protections are embedded in South Dakota’s administrative code and tax statutes, particularly:

SDCL 10-59: Uniform procedures for tax administration
SDCL 10-1-28.1 to 10-1-28.9: Confidentiality protections
South Dakota Taxpayers’ Bill of Rights: Public summary of all rights

Understanding your rights can help you challenge unfair treatment and seek remedies if procedures are not followed. These protections apply to all individuals, organizations, and contractors subject to South Dakota taxes.

Appealing or Disputing a Tax Bill

If you believe a South Dakota Department of Revenue (DOR) tax assessment is incorrect, you can challenge it. The state offers informal and formal methods for resolving disputes, and the appeal process is clearly defined under SDCL 10-59.

Informal Review

Before filing a formal appeal, taxpayers can contact the DOR directly to request an informal review. This step allows you to:

Clarify the basis of the tax liability.
Submit documentation (such as invoices, purchases, or exemption certificates).
Correct simple filing or calculation errors.

Many minor issues can be resolved at this stage without escalating the matter.

Formal Administrative Appeal

If the informal review doesn’t lead to a resolution, a formal appeal can be filed:

You must submit a written appeal within 30 days of the DOR’s notice of assessment.
An impartial hearing examiner reviews the appeal, and you may be asked to attend a hearing.
Collection actions may be paused during the appeal, although interest may continue to accrue.

Further Legal Appeals

If you are not satisfied with the administrative decision,

You may appeal to the South Dakota Office of Hearing Examiners.
From there, you can take your case to circuit court.
The South Dakota Supreme Court is the last resort, if required.

Each level of appeal has its filing deadlines, documentation standards, and procedural rules.

Special Rules for Property Tax Appeals

If you are disputing property taxes, the appeal process begins at the local level:

File with the Local Board of Equalization by March 13.
If needed, appeal to the County Board of Equalization by April 1.
Further appeals must be submitted to the Office of Hearing Examiners by May 16.

The burden of proof typically falls on the taxpayer to show why the DOR's or local assessor’s determination is incorrect. Maintaining accurate records, including resale, rental, or property ownership documents, strengthens your case.

Ways to Stop or Delay Collection Actions

If you cannot fully pay your tax liability, South Dakota offers several options to help delay or stop aggressive collection actions such as liens, garnishments, or levies. These options are most effective when initiated before enforcement begins.

Payment Options

Full Payment: Paying the full amount due, including penalties and interest, will immediately stop the collection process. This is the fastest way to restore good standing.
Installment Agreement (Payment Plan): Taxpayers may request a payment plan to spread the balance over time. If the taxpayer makes the agreed payments, the DOR generally suspends further enforcement, even though interest continues to accrue.
Offer in Compromise: In rare cases, the DOR may accept less than the full amount owed if the taxpayer can demonstrate financial hardship or significant doubt regarding the debt's collectibility.

Procedural Relief Options

Request a Hearing: If you disagree with a tax assessment, you can formally request a hearing. This may pause collections while your case is under review.
Appeal Filing: A timely appeal (within 30 days) of the DOR’s assessment also suspends most collection activity until a decision is reached.
Currently Not Collectible Status: If you're experiencing extreme hardship, you can request to have your account classified as “currently not collectible.” During this period, the DOR will halt enforcement actions, but interest will continue accumulating.

Legal Protections

Bankruptcy: Filing for bankruptcy can trigger an automatic stay that halts most DOR collection efforts. However, many South Dakota taxes may not be discharged depending on the timing and filing status.
Statute of Limitations: The DOR generally has three years from the assessment date to collect unpaid taxes, although exceptions may apply.
Challenging Procedural Errors: If the DOR failed to follow proper procedures—such as providing required notice—you may have legal grounds to halt collections.

These relief strategies can offer time to stabilize your finances and potentially reduce liability. The sooner you act, the more likely you'll avoid severe consequences, such as the seizure of tangible personal property or wage garnishment.

Preparing Before Collections Escalate

Proactive preparation is key to preventing minor tax issues from turning into full-scale collection actions. Whether you’re behind on sales tax filings, missed a payment, or simply want to avoid surprises, taking early steps can help protect your business, assets, and financial security.

Checklist: Documents to Gather

Before contacting the South Dakota Department of Revenue (DOR), collect the following:

Recent tax returns for the relevant tax periods
Notices or correspondence received from the DOR
Proof of payment or bank statements showing partial or complete payments
Detailed transaction records for retail sales, rental, or services
Resale certificates or exempt organization documentation
Personal or business financial statements (to demonstrate hardship if needed)

Checklist: Actions to Take

Review your account for missing returns or unpaid balances
Contact the DOR before enforcement begins to explore resolution options
Correct inaccurate filings or missing information
Update address information to ensure delivery of notices
Request clarification on how penalties or interest were calculated
Consult a tax professional if you’re unsure how to proceed

Benefits of Early Preparation

Avoid wage garnishment, bank levies, or property seizures
Maintain eligibility for payment plans or other programs
Protect your business license, tax license, or contractor registration
Ensure more flexibility in negotiations with the DOR
Reduce long-term stress and minimize legal exposure

Being organized and proactive can distinguish between a manageable resolution and a disruptive enforcement action. If you anticipate owing or are currently behind, it would be beneficial to begin preparing now.

When to Get Professional Help

Navigating South Dakota’s tax collection process can be challenging—especially when enforcement actions are underway or legal complexities arise. Working with a tax professional, attorney, or accountant can provide critical support and protection in certain situations.

When to Contact the Department of Revenue Directly

For routine matters or minor issues, you can often work directly with the South Dakota Department of Revenue:

Questions about filing requirements, tax rates, or exemptions
Clarifying notices or payment amounts
Setting up a basic payment plan
Updating registration or ownership details for your business

The DOR’s representatives can provide guidance and may direct you to available programs that help resolve debt.

When to Hire a Tax Professional or Attorney

Consider seeking expert help in the following scenarios:

You’ve received a distress warrant, bank levy, or wage garnishment
You need assistance preparing for a formal hearing or appeal
You’re facing a large or complex tax liability with multiple tax types (e.g., property taxes, sales tax, and use tax)
You believe your business was incorrectly assessed due to contractor misclassification, industry rules, or products transferred electronically
You're planning to file for bankruptcy and want to understand how it affects tax debt

Benefits of Professional Representation

A qualified tax advisor can:

Help you file missing returns or correct errors
Communicate directly with the DOR on your behalf
Protect your legal rights and ensure due process
Develop strategies to reduce penalties, avoid interest, or qualify for exemptions

Frequently Asked Questions

What taxes are collected in South Dakota?

South Dakota does not levy a personal or corporate income tax. Instead, it collects various state and local taxes, including sales, use, municipal, property, and excise taxes, such as the contractor’s excise tax. These taxes are administered primarily by the South Dakota Department of Revenue and local county treasurers and serve as the primary funding sources for essential state and local government services.

How does the Department of Revenue notify taxpayers of a debt?

The South Dakota Department of Revenue issues a formal “Notice and Demand” letter when tax debt is owed. This document outlines the type of tax, the amount due, penalties, and the payment deadline. It is typically mailed to the last known address on file and marks the official beginning of the collection process. Failing to respond can lead to further enforcement, so prompt action is essential.

Can the state garnish wages or seize property for unpaid taxes?

If you do not respond to official notices or fail to resolve the balance, the South Dakota Department of Revenue may take enforcement actions. These include wage garnishment, property seizure, or filing a tax lien against your assets. Such actions are legally authorized once the tax is assessed and deemed collectible, so it is essential to communicate with the DOR early to avoid escalation.

What happens if I ignore a tax notice?

Ignoring a South Dakota Department of Revenue tax notice can lead to aggressive enforcement measures. These may include bank levies, wage garnishment, property seizure, or negative impacts on your credit. If you miss deadlines, the DOR may proceed without further warning. To avoid these outcomes, you should act quickly by paying the balance, requesting a payment plan, or appealing the review.

Can I reduce or cancel my South Dakota tax debt?

Yes, in limited circumstances, taxpayers may qualify for a reduction or cancellation of tax debt through an Offer in Compromise. This relief option is available to those facing severe financial hardship or when there’s a legitimate doubt about the tax liability. Approval is at the discretion of the Department of Revenue and requires complete documentation and a formal application process.

Overview of South Dakota’s Tax System

Primary Revenue Sources

The state’s revenue is primarily generated through the following taxes:

Sales and Use Tax: South Dakota imposes a 4.2% base sales tax on most goods and services, with additional municipal tax rates that can increase the total to over 6% depending on location. The tax rate applies to the purchase price of tangible personal property and certain services, including products transferred electronically, eating establishments, and lodging accommodations.
Property Taxes: Local governments—not the state—administer property taxes. These taxes fund public schools, counties, and municipalities. The value of real estate and specific personal property determines the tax amount due.
Excise and Special Taxes: South Dakota collects a 4% vehicle excise tax on motor vehicle purchases, as well as other levies such as
- Alcohol sales tax
- Tourism or hotel occupancy taxes
- Bank franchise and gross receipts taxes
- Select contractors’ excise taxes on construction services

No Income Tax, Aggressive Collections

Agencies Involved in Collection

South Dakota Department of Revenue (DOR): Oversees tax collection, licensing, audits, and enforcement.
County Treasurers: Manage property tax billing and collection.
Local Municipalities: May impose additional taxes and handle enforcement within their jurisdiction.

When and Why Tax Debt Becomes Collectible

Common Triggers for Collection

Several events can trigger tax debt collection:

Late or Missing Tax Returns: When a taxpayer fails to file a required return by the due date, the South Dakota Department of Revenue (DOR) may issue an estimated assessment based on prior activity or industry norms.
Underpayment of Taxes Owed: If a return is filed but the payment is not made in full, the outstanding amount becomes immediately collectible.
Audit Findings or Corrections: If the DOR conducts an audit or discovers errors in a previously submitted return, it may assess additional tax due, including gross receipts that were formerly underreported.
Expired Exemptions or Registrations: If an exempt organization or resale certificate holder fails to renew or misuses its exemption, previously exempt sales may become taxable.

When Does Tax Debt Become Enforceable?

A debt typically becomes enforceable:

On the effective date following a missed filing or payment deadline,
After the DOR issues a notice of assessment, or
When audit results are finalized, they reveal unreported or underreported taxes.

Interest begins to accrue from the original due date, and penalties may be added if the DOR determines negligence or willful disregard of tax laws.

Consequences of Inaction

If a taxpayer fails to resolve the issue, the DOR may take the following actions:

File liens against property
Garnish employee wages
Seize business or personal assets
Initiate legal proceedings based on South Dakota’s adoption of applicable sections of the Internal Revenue Code.

Proactively filing timely returns, reviewing account status, and addressing discrepancies can help taxpayers avoid entering the collection phase altogether.

Understanding the Notice and Demand Process

What the Notice Includes

The notice and demand letter contains key details that taxpayers need to understand their situation:

Tax Type and Amount Due: Specifies the original tax amount, interest, and accrued penalties.
Deadline for Payment: Indicates the date the full payment must be received to avoid enforcement.
Legal Warning: If the debt remains unpaid, further action—such as liens, levies, or garnishments—may occur.
Instructions for Response: This section provides contact details for the DOR and instructions on how to dispute the amount or set up a payment arrangement.
Reference to Authority: Cites relevant South Dakota tax laws, typically under SDCL 10-59-10 or 10-59-13, which govern how tax debts are enforced.

Timeline for Taxpayer Action

The DOR typically allows taxpayers to respond 30 days from the mailing date of the notice. During this period, individuals and businesses can:

Pay the full balance.
Apply for a payment plan or request relief.
Submit supporting documents to correct or challenge the assessment.
Request a formal hearing to dispute the liability.

Why This Notice Matters

Failing to act on the notice may result in immediate enforcement actions, including:

Filing of tax liens on personal or business property,
Seizure of accounts or wages,
The case may be assigned to legal collections.

Key Enforcement Tools Used by the South Dakota DOR

Tax Liens: Actions by the South Dakota Department

A tax lien is a legal claim the state places on a taxpayer’s property—including real estate and tangible personal property—to secure payment of delinquent tax liability.

Filing Process: The DOR files a lien with the Register of Deeds in the county where the taxpayer owns property. This document becomes a public record and attaches to all current and future assets.
Impact of a Lien
- Lower your credit rating,
- Hinder the sale or refinance of property,
- Take priority over subsequent creditor claims,
- Extend beyond individual ownership to jointly held assets.
How to Remove a Lien: According to SDCL 10-59-30, the lien must be released within 30 days after the full balance, including interest and penalties, is paid. A corrected lien release will also update the public records if an error occurs.

Wage Garnishments

Wage garnishment allows the DOR to collect unpaid tax directly from a taxpayer’s paycheck by requiring their employer to withhold a portion of earnings.

Process Overview: The DOR sends a garnishment notice to the employer, legally obligated to comply.
Limits on Garnishment: South Dakota law generally limits garnishment to 20% of a person’s disposable income, although different rules may apply based on the type of debt.
Employer Responsibilities
- Begin withholding by the effective date listed.
- Continue withholding until the debt is satisfied or the DOR releases the order.
- Avoid retaliating against an employee for a single garnishment.

Bank Levies

A bank levy authorizes the DOR to seize funds from a taxpayer’s bank account to cover outstanding tax liability.

How It Works: The DOR issues a levy to the financial institution, freeing the account.
Holding Period: The funds are frozen for a short period—typically 21 days—to allow the taxpayer to respond or demonstrate financial hardship.
Seizure of Funds: If no action is taken, the bank sends the funds directly to the DOR. Multiple levies may occur if the debt is not fully satisfied.

Property Seizure and Sale

In severe cases, the DOR can seize real or personal property and sell it to recover unpaid taxes.

Legal Basis: Under SDCL 10-59-13, the Secretary of Revenue may issue a distress warrant, directing a sheriff to seize and sell property.
Sheriff’s Role: Upon receiving the warrant, the sheriff locates and seizes the taxpayer’s assets, then conducts a public auction.
Types of Property Affected
- Motor vehicles
- Business equipment or inventory
- Rental property or other real estate
Protections and Oversight: A division director or higher authority must approve the seizure, and the taxpayer must be notified before the sale. All proceeds are applied to the outstanding balance, with excess funds refunded if applicable.

Taxpayer Rights During Collection

Core Taxpayer Rights

South Dakota law provides the following key rights during the tax collection process:

Right to Notice: Taxpayers must receive written notification before audits, assessments, or collection actions begin.
Right to Appeal: Individuals and businesses can appeal tax assessments through administrative hearings and, if necessary, through the circuit or state supreme court.
Right to Confidentiality: All information submitted to the DOR, including account details and address information, is protected under privacy statutes.
Right to Courteous and Prompt Service: Taxpayers are entitled to clear, respectful communication from DOR staff and timely responses to inquiries.
Right to Lien Removal: After a tax debt is paid in full, taxpayers have the right to a lien release within 30 days (SDCL 10-59-30). The department must also correct filing errors.
Right to Clear Information: DOR correspondence must use plain language so taxpayers can understand the laws and procedures that apply to them.
Right to Rely on Written Advice: If a taxpayer receives incorrect written guidance from the DOR and reasonably relies on it, they may not be penalized (SDCL 10-59-27).
Right to Fair Collection Practices: Collection quotas cannot incentivize DOR staff, and actions must follow due process (SDCL 10-59-29).

Where These Rights Are Found

These protections are embedded in South Dakota’s administrative code and tax statutes, particularly:

SDCL 10-59: Uniform procedures for tax administration
SDCL 10-1-28.1 to 10-1-28.9: Confidentiality protections
South Dakota Taxpayers’ Bill of Rights: Public summary of all rights

Appealing or Disputing a Tax Bill

Informal Review

Before filing a formal appeal, taxpayers can contact the DOR directly to request an informal review. This step allows you to:

Clarify the basis of the tax liability.
Submit documentation (such as invoices, purchases, or exemption certificates).
Correct simple filing or calculation errors.

Many minor issues can be resolved at this stage without escalating the matter.

Formal Administrative Appeal

If the informal review doesn’t lead to a resolution, a formal appeal can be filed:

You must submit a written appeal within 30 days of the DOR’s notice of assessment.
An impartial hearing examiner reviews the appeal, and you may be asked to attend a hearing.
Collection actions may be paused during the appeal, although interest may continue to accrue.

Further Legal Appeals

If you are not satisfied with the administrative decision,

You may appeal to the South Dakota Office of Hearing Examiners.
From there, you can take your case to circuit court.
The South Dakota Supreme Court is the last resort, if required.

Each level of appeal has its filing deadlines, documentation standards, and procedural rules.

Special Rules for Property Tax Appeals

If you are disputing property taxes, the appeal process begins at the local level:

File with the Local Board of Equalization by March 13.
If needed, appeal to the County Board of Equalization by April 1.
Further appeals must be submitted to the Office of Hearing Examiners by May 16.

Ways to Stop or Delay Collection Actions

Payment Options

Full Payment: Paying the full amount due, including penalties and interest, will immediately stop the collection process. This is the fastest way to restore good standing.
Installment Agreement (Payment Plan): Taxpayers may request a payment plan to spread the balance over time. If the taxpayer makes the agreed payments, the DOR generally suspends further enforcement, even though interest continues to accrue.
Offer in Compromise: In rare cases, the DOR may accept less than the full amount owed if the taxpayer can demonstrate financial hardship or significant doubt regarding the debt's collectibility.

Procedural Relief Options

Request a Hearing: If you disagree with a tax assessment, you can formally request a hearing. This may pause collections while your case is under review.
Appeal Filing: A timely appeal (within 30 days) of the DOR’s assessment also suspends most collection activity until a decision is reached.
Currently Not Collectible Status: If you're experiencing extreme hardship, you can request to have your account classified as “currently not collectible.” During this period, the DOR will halt enforcement actions, but interest will continue accumulating.

Legal Protections

Bankruptcy: Filing for bankruptcy can trigger an automatic stay that halts most DOR collection efforts. However, many South Dakota taxes may not be discharged depending on the timing and filing status.
Statute of Limitations: The DOR generally has three years from the assessment date to collect unpaid taxes, although exceptions may apply.
Challenging Procedural Errors: If the DOR failed to follow proper procedures—such as providing required notice—you may have legal grounds to halt collections.

Preparing Before Collections Escalate

Checklist: Documents to Gather

Before contacting the South Dakota Department of Revenue (DOR), collect the following:

Recent tax returns for the relevant tax periods
Notices or correspondence received from the DOR
Proof of payment or bank statements showing partial or complete payments
Detailed transaction records for retail sales, rental, or services
Resale certificates or exempt organization documentation
Personal or business financial statements (to demonstrate hardship if needed)

Checklist: Actions to Take

Review your account for missing returns or unpaid balances
Contact the DOR before enforcement begins to explore resolution options
Correct inaccurate filings or missing information
Update address information to ensure delivery of notices
Request clarification on how penalties or interest were calculated
Consult a tax professional if you’re unsure how to proceed

Benefits of Early Preparation

Avoid wage garnishment, bank levies, or property seizures
Maintain eligibility for payment plans or other programs
Protect your business license, tax license, or contractor registration
Ensure more flexibility in negotiations with the DOR
Reduce long-term stress and minimize legal exposure

When to Get Professional Help

When to Contact the Department of Revenue Directly

For routine matters or minor issues, you can often work directly with the South Dakota Department of Revenue:

Questions about filing requirements, tax rates, or exemptions
Clarifying notices or payment amounts
Setting up a basic payment plan
Updating registration or ownership details for your business

The DOR’s representatives can provide guidance and may direct you to available programs that help resolve debt.

When to Hire a Tax Professional or Attorney

Consider seeking expert help in the following scenarios:

You’ve received a distress warrant, bank levy, or wage garnishment
You need assistance preparing for a formal hearing or appeal
You’re facing a large or complex tax liability with multiple tax types (e.g., property taxes, sales tax, and use tax)
You believe your business was incorrectly assessed due to contractor misclassification, industry rules, or products transferred electronically
You're planning to file for bankruptcy and want to understand how it affects tax debt

Benefits of Professional Representation

A qualified tax advisor can:

Help you file missing returns or correct errors
Communicate directly with the DOR on your behalf
Protect your legal rights and ensure due process
Develop strategies to reduce penalties, avoid interest, or qualify for exemptions

South Dakota Tax Collection Process: A Complete Guide for Taxpayers

Overview of South Dakota’s Tax System

Primary Revenue Sources

No Income Tax, Aggressive Collections

Agencies Involved in Collection

When and Why Tax Debt Becomes Collectible

Common Triggers for Collection

When Does Tax Debt Become Enforceable?

Consequences of Inaction

Understanding the Notice and Demand Process

What the Notice Includes

Timeline for Taxpayer Action

Why This Notice Matters

Key Enforcement Tools Used by the South Dakota DOR

Tax Liens: Actions by the South Dakota Department

Wage Garnishments

Bank Levies

Property Seizure and Sale

Taxpayer Rights During Collection

Core Taxpayer Rights

Where These Rights Are Found

Appealing or Disputing a Tax Bill

Informal Review

Formal Administrative Appeal

Further Legal Appeals

Special Rules for Property Tax Appeals

Ways to Stop or Delay Collection Actions

Payment Options

Procedural Relief Options

Legal Protections

Preparing Before Collections Escalate

Checklist: Documents to Gather

Checklist: Actions to Take

Benefits of Early Preparation

When to Get Professional Help

When to Contact the Department of Revenue Directly

When to Hire a Tax Professional or Attorney

Benefits of Professional Representation

Frequently Asked Questions

What taxes are collected in South Dakota?

How does the Department of Revenue notify taxpayers of a debt?

Can the state garnish wages or seize property for unpaid taxes?

What happens if I ignore a tax notice?

Can I reduce or cancel my South Dakota tax debt?

Overview of South Dakota’s Tax System

Primary Revenue Sources

No Income Tax, Aggressive Collections

Agencies Involved in Collection

When and Why Tax Debt Becomes Collectible

Common Triggers for Collection

When Does Tax Debt Become Enforceable?

Consequences of Inaction

Understanding the Notice and Demand Process

What the Notice Includes

Timeline for Taxpayer Action

Why This Notice Matters

Key Enforcement Tools Used by the South Dakota DOR

Tax Liens: Actions by the South Dakota Department

Wage Garnishments

Bank Levies

Property Seizure and Sale

Taxpayer Rights During Collection

Core Taxpayer Rights

Where These Rights Are Found

Appealing or Disputing a Tax Bill

Informal Review

Formal Administrative Appeal

Further Legal Appeals

Special Rules for Property Tax Appeals

Ways to Stop or Delay Collection Actions

Payment Options

Procedural Relief Options

Legal Protections

Preparing Before Collections Escalate

Checklist: Documents to Gather

Checklist: Actions to Take

Benefits of Early Preparation

When to Get Professional Help

When to Contact the Department of Revenue Directly

When to Hire a Tax Professional or Attorney