Record Retention

Record Retention Requirements

Any business subject to sales, use, or contractor’s excise tax in this state can be audited pursuant to South Dakota law 10-59-5. If selected for examination, business records supporting your tax liability will be requested by the auditor and must be furnished within sixty days of the commencement date of the audit. Examples of records that should be retained as support are:

Gross Receipts:

  • Sales and billing invoices
  • General and subsidiary ledgers
  • Cash register tapes - Journal tapes, detail tapes, Z tapes, guest checks
  • Bank deposit slips and statements
  • Sales and/or cash receipts journal
  • Contracts
  • Pricing and portion / service size information - menu prices

Deductions Support:

  • Resale certificates
  • Proof of exemption (exemption certificate or proof of government funds)
  • Bills of lading or other proof of delivery
  • Credit memorandums
  • Bad debts as claimed on federal income tax returns

Use Tax:

  • Purchase invoices
  • Cash disbursement journal or check register
  • Fixed assets schedule
  • Inventory withdrawal records
  • Depreciation schedules

All tax returns, as well as the schedules or working papers used in preparing tax returns, should also be preserved. In addition to the above records, the business should keep copies of supporting information, worksheets, and schedules showing how the sales and use tax amounts were determined. The administrative ruling establishing these requirements is 64:06:01:35.

All businesses should maintain these records for at least the current month and the previous thirty-six months. If your business is selected for examination, you will receive a Notice of Intent to Audit at least thirty days prior to the commencement of the audit. Once a Notice of Intent to Audit is received, all records should be maintained for the thirty-six periods prior to the date the notice was mailed, in addition to all periods that follow this date. Unlicensed businesses and businesses convicted of tax fraud are not limited to a three year look back and may be audited from the start of their business forward. Anyone who fails or refuses to exhibit the records and books required to the Department of Revenue for the purpose of examination could be found guilty of a Class 1 misdemeanor.

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