CHAPTER 64:01:01
ADMINISTRATION OF DEPARTMENT
Section
64:01:01:01 Definitions.
64:01:01:01.01 to 64:01:01:03 Repealed.
64:01:01:04 Public requests for information.
64:01:01:05 Rules of practice and procedure.
64:01:01:06 and 64:01:01:07 Repealed.
64:01:01:08 Procedure to obtain declaratory ruling.
64:01:01:09 Hearings on petition to obtain declaratory ruling.
64:01:01:10 Decisions.
64:01:01:11 Construction.
64:01:01:11.01 Prehearing conference.
64:01:01:12 Conduct of hearings.
64:01:01:13 Notice of time and place for hearings -- Hearing examiners.
64:01:01:14 All parties to be heard.
64:01:01:15 Repealed.
64:01:01:16 Evidence receivable.
64:01:01:17 Repealed.
64:01:01:18 Void.
64:01:01:19 Forms.
64:01:01:20 Reduction or abatement of taxes, interest, or penalties -- Requirements for showing widespread misapplication of tax.
64:01:01:21 Electronic tax payments (ETP) and electronic tax filings (ETF).
64:01:01:22 Use of fedwire in emergencies.
64:01:01:23 Use of check in emergencies.
64:01:01:24 Repealed.
64:01:01:25 Notice of change in bank or account number.
64:01:01:26 Dishonored transaction -- Fee.
64:01:01:27 Taxpayer to retain confirmation number from ETF and ETP transactions for three years.
64:01:01:28 Audit review.
64:01:01:29 New facilities refund or delay in payment -- Commencement of project.
64:01:01:30 New facilities refund -- Application for permit.
64:01:01:31 New facilities refund -- Documentation to support claim.
64:01:01:32 Electronic or digital signature.
64:01:01:33 Application for direct payment permit.
64:01:01:34 Qualification process and requirements for direct payment permit holders.
64:01:01:35 Record keeping requirements for direct payment permit holders.
64:01:01:36 Reporting of tax for direct payment permit holders.
64:01:01:37 Certain transactions not permitted for direct payment permit holders.
64:01:01:38 Duties of direct payment permit holders.
64:01:01:39 Responsibilities of vendors selling to direct payment permit holders.
64:01:01:40 Payment of municipal taxes for direct payment permit holders.
64:01:01:41 Revocation of direct payment permit.
64:01:01:42 Definitions of terms used in recordkeeping and retention regulations.
64:01:01:43 Maintenance and access to taxpayer records.
64:01:01:44 Requirements for machine-sensible records.
64:01:01:45 Requirements for electronic data interchange.
64:01:01:46 Description of process that creates records.
64:01:01:47 Maintenance of machine-sensible records.
64:01:01:48 Access to machine-sensible records.
64:01:01:49 Taxpayer creation of machine-sensible records for department examination and responsibility for records.
64:01:01:50 Requirements for conversion of hard-copy records to an imaging system.
64:01:01:51 Effect of maintaining machine-sensible records on hard-copy recordkeeping requirements.
64:01:01:52 Effective date of rate changes.
64:01:01:53 Effective date local rate changes -- Sales from preprinted catalogs.
64:01:01:01. Definitions. Terms used in this title mean:
(1) "Department," the Department of Revenue and Regulation;
(2) "Secretary," the secretary of Revenue and Regulation;
(3) "Quarter," a calendar quarter or three months, specifically January through March, April through June, July through September, and October through December.
(4) "Bimonthly," a calendar period of two months, specifically January-February, March-April, May-June, July-August, September-October, and November-December;
(5) "Impartial hearing examiner," one who is not interested in the outcome of the case;
(6) "ETP," an electronic tax payment;
(7) "Fedwire," a transfer of funds from an account in one bank to an account in another bank handled electronically through the Federal Reserve System.
Source: SL 1975, ch 16, § 1; 11 SDR 1, effective July 19, 1984; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 17 SDR 4, effective July 18, 1990; 21 SDR 219, effective July 1, 1995; 30 SDR 58, effective November 5, 2003.
General Authority:SDCL 10-45-47.1, 10-59-38.
64:01:01:01.01. Impartial hearing examiner.Repealed.
Source: 17 SDR 4, effective July 18, 1990; repealed 20 SDR 103, effective January 10, 1994.
64:01:01:02. Description of organization.Repealed.
Source: SL 1975, ch 16, § 1; repealed, 4 SDR 35, effective December 22, 1977.
64:01:01:03. Method of operation.Repealed.
Source: SL 1975, ch 16, § 1; repealed, 4 SDR 35, effective December 22, 1977.
64:01:01:04. Public requests for information. All requests for information as well as any application for a rule or other substantive or procedural inquiry must be addressed to the secretary.
Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995.
General Authority:SDCL 10-45-47.1, 10-59-38.
Law Implemented:SDCL 1-26-12.1.
64:01:01:05. Rules of practice and procedure. An individual does not need a license to practice before the agency; however, if a person is representing someone else, the person must be a member of the state bar or associated with a member of that group before appearing before the agency as an attorney or advocate.
Source: SL 1975, ch 16, § 1; 8 SDR 81, effective January 10, 1982; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995.
General Authority:SDCL 10-59-38.
Law Implemented:SDCL 1-26-18.
64:01:01:06. Procedure for adoption of rules and regulations.Repealed.
Source: SL 1975, ch 16, § 1; repealed, 4 SDR 35, effective December 22, 1977.
64:01:01:07. Petition for adoption of rules.Repealed.
Source: SL 1975, ch 16, § 1; repealed, 4 SDR 35, effective December 22, 1977.
64:01:01:08. Procedure to obtain declaratory ruling. An individual may apply for a declaratory ruling by filing a petition directed to the secretary which states generally the factual situation existing under which the question arises. The petition must be verified by the petitioner, except that matters not within the personal knowledge of the petitioner may be on information or belief. The petition shall identify all persons who have or claim any interest which would be affected by the declaratory ruling. When declaratory relief is sought all persons who have or claim any interest which would be affected by the declaration shall be made parties.
Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995.
General Authority: SDCL 10-59-38.
Law Implemented: SDCL 1-26-15.
Declaratory Ruling: This request for a ruling from the Department of Revenue and Regulation regarding its interpretation of SDCL 35-4-2.10 and SDCL 35-4-110 to 35-4-119, inclusive, as applied to 10 different factual scenarios. Secretary of Revenue and Regulation Declaratory Ruling No. 08-01.
Declaratory Ruling: A contested case hearing is not required prior to the revocation and cancellation of a sales tax exemption, but an aggrieved party may petition the agency for a declaratory ruling on the merits of whether the revocation and cancellation was proper. Secretary of Revenue Regulation Declaratory Ruling No. 08-3.
64:01:01:09. Hearings on petition to obtain declaratory ruling. A hearing on a petition for declaratory ruling may be held upon ten days written notice to all parties. The hearing must be public; testimony must be recorded on magnetic tape or by other equivalent means. At the request of any person, testimony given at such a hearing must be transcribed. The transcription expense must be borne by each person requesting a transcript. Parties may make their own provisions to have court reporters present at the hearing. Briefs may be filed by interested parties as the secretary may direct.
Source: SL 1975, ch 16, § 1; 4 SDR 35, effective December 22, 1977; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995.
General Authority:SDCL 10-59-38.
Law Implemented:SDCL 1-26-15.
64:01:01:10. Decisions. The secretary may refuse to render or enter a declaratory ruling if such a ruling would not terminate the uncertainty or controversy giving rise to the proceeding. All decisions must be made within 30 days of final submission of the matter to the department.
Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995.
General Authority:SDCL 10-59-38.
Law Implemented:SDCL 1-26-15.
64:01:01:11. Construction. Sections 64:01:01:05 to 64:01:01:17, inclusive, are remedial; their purpose is to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations, and they are to be liberally construed and administered.
Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995.
General Authority:SDCL 10-59-38.
Law Implemented:SDCL 10-1-13.
64:01:01:12. Conduct of hearings. Hearings held by the department, unless otherwise required by statute, must be conducted in accordance with §§ 64:01:01:13 to 64:01:01:16, inclusive, and in accordance with the provisions of SDCL 1-26.
Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995.
General Authority:SDCL 10-59-38.
Law Implemented:SDCL 1-26-12.1.
Declaratory Ruling: A contested case hearing is not required prior to the revocation and cancellation of a sales tax exemption, but an aggrieved party may petition the agency for a declaratory ruling on the merits of whether the revocation and cancellation was proper. Secretary of Revenue Declaratory Ruling No. 80-3.
64:01:01:13. Notice of time and place for hearings -- Hearing examiners. In all cases to be heard, all parties must be given notice of at least ten days. Hearings shall be held at the time and place directed by the secretary. For the purpose of the hearing, the secretary may designate a hearing examiner.
The secretary or designated hearing examiner may not grant a request for a continuance or postponement of the hearing after notice of the time and place has been served on all parties unless the requesting party demonstrates good cause for the request. If a party fails to appear at the prehearing conference or the hearing, the secretary or the designated hearing examiner shall order that the matter be dismissed with prejudice to the party who fails to appear, unless good cause exists for the failure to appear. For purposes of this rule, good cause means inability to appear at the prehearing conference or hearing by a party or an attorney representing one of the parties. The designated hearing examiner shall submit findings and recommendations to the secretary who shall make the final decision.
Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995; 23 SDR 118, effective January 27, 1997.
General Authority:SDCL 10-59-38.
Law Implemented:SDCL 1-26-16.
64:01:01:14. All parties to be heard. The hearing officer may order proposed findings from any party to the hearing on the officer's own motion or at the request of any party.
Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995.
General Authority:SDCL 10-59-38.
Law Implemented:SDCL 1-26-18.
64:01:01:15. Transcript of proceedings.Repealed.
Source: SL 1975, ch 16, § 1; repealed, 13 SDR 129, 13 SDR 134, effective July 1, 1987.
64:01:01:16. Evidence receivable. Documentary evidence may be received in the form of copies or excerpts, if the original is not readily available. Upon request, parties must be given an opportunity to compare the copy with the original.
Source: SL 1975, ch 16, § 1; 13 SDR 129, 13 SDR 134, effective July 1, 1987; 21 SDR 219, effective July 1, 1995.
General Authority:SDCL 10-59-38.
Law Implemented:SDCL 1-26-19.
64:01:01:17. Public examination of business and financial records.Repealed.
Source: SL 1975, ch 16, § 1; repealed, 13 SDR 129, 13 SDR 134, effective July 1, 1987.
64:01:01:18. Disclosure of federal tax information and information received pursuant to agreement on coordination of tax administration. Void.
Source: 7 SDR 80, effective February 22, 1981; 13 SDR 129, 13 SDR 134, effective July 1, 1987; voided by SL 1995, ch 53, § 10, effective July 1, 1995.
64:01:01:19. Forms. Any person required to file a return with the department must file a return on a form provided by the department. A return not provided by the department may be submitted only if it has received prior approval from the department. A return that is not readable by the department's computer will not be accepted and will be returned to the taxpayer. The taxpayer must refile on a provided or approved form on or before the last day the taxes are due.
Source: 17 SDR 4, effective July 18, 1990; 21 SDR 219, effective July 1, 1995; 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006; 33 SDR 226, effective June 27, 2007.
General Authority: SDCL 10-33A-16(2), 10-45-47.1(2), 10-45D-13(2), 10-46-35.1(2), 10-46A-19(2), 10-46B-18(2), 10-46E-11(2), 10-52A-7(2).
Law Implemented: SDCL 10-33A-10.1, 10-45-27.3, 10-45D-10.2, 10-46-27, 10-46A-8, 10-46A-1.8, 10-46B-1.6, 10-46E-8, 10-52A-4.2.
64:01:01:20. Reduction or abatement of taxes, interest, or penalties -- Requirements for showing widespread misapplication of tax. In order to show a widespread misunderstanding of the application of a tax to a certain transaction, the taxpayer must show documentary proof illustrating this misunderstanding among other taxpayers and written proof that the taxpayer has been in contact with the department in an effort to determine the taxes that are due.
In making a determination, the secretary may consider tax publications distributed by the department issued on the subject or that the argument raised by the taxpayer is not valid on its face or has been found to lack merit in past administrative decisions or litigation.
Source: 17 SDR 4, effective July 18, 1990; 21 SDR 219, effective July 1, 1995.
General Authority:SDCL 10-45-47.1, 10-46-35.1, 10-46A-19, 10-46B-18.
Law Implemented:SDCL 10-59-31.
64:01:01:21. Electronic tax payments (ETP) and electronic tax filings (ETF). Any taxpayer who elects to file taxes by electronic tax filing (ETF) and remit taxes by electronic tax payments (ETP) must make this election on a form provided by the secretary by the fifteenth day of the month the electronic funds transaction and electronic filing begins and must have the approval of the department.
The taxpayer may elect to terminate the ETF and ETP method of payment by sending written notice to the department. The notice must be received by the department at least 15 days before the ETF and ETP due date. The taxpayer shall specify the effective date of the last ETF and ETP.
Source: 17 SDR 4, effective July 18, 1990; 21 SDR 219, effective July 1, 1995; 29 SDR 177, effective July 2, 2003; 31 SDR 214, effective July 6, 2005.
General Authority: SDCL 10-45-47.1(2), 10-46-35.1(2), 10-46A-19(2), 10-46B-18(2).
Law Implemented: SDCL 10-59-32.
64:01:01:22. Use of fedwire in emergencies. Taxpayers who remit tax payments by ETP may use the fedwire method of payment in emergencies. Only the following situations constitute an emergency for the purposes of this section:
(1) A death in the taxpayer's immediate family;
(2) A death of the taxpayer's key personnel;
(3) A natural disaster affecting the taxpayer's business;
(4) Failure of the electronic return system on the twenty-third day of the month; or
(5) Failure of the computer under the control of the Automated Clearing House (ACH) system or the bank participating in ACH electronic funds transfer.
The taxpayer must notify the department in writing of the reason for using a fedwire. The notice may take place concurrently with the use of the fedwire. The taxpayer is responsible for the cost of the use of the fedwire.
Source: 17 SDR 4, effective July 18, 1990; 18 SDR 3, effective July 14, 1991; 21 SDR 219, effective July 1, 1995; 25 SDR 167, effective July 1, 1999; 29 SDR 177, effective July 2, 2003.
General Authority:SDCL 10-45-47.1(2), 10-46-35.1(2), 10-46A-19(2), 10-46B-18(2).
Law Implemented:SDCL 10-59-32.
64:01:01:23. Use of check in emergencies. If a power or telecommunication failure makes it impossible for an ETP to occur by the date the payment is due, a taxpayer may pay the taxes due by check sent to the department by a method ensuring that payment will be received on or before the due date.
Source: 17 SDR 4, effective July 18, 1990; 21 SDR 219, effective July 1, 1995; 29 SDR 177, effective July 2, 2003.
General Authority:SDCL 10-45-47.1(2), 10-46-35.1(2), 10-46A-19(2), 10-46B-18(2).
Law Implemented:SDCL 10-59-32.
64:01:01:24. Time for filing using ETP.Repealed.
Source: 17 SDR 4, effective July 18, 1990; 21 SDR 219, effective July 1, 1995; repealed, 25 SDR 167, effective July 1, 1999.
64:01:01:25. Notice of change in bank or account number. The taxpayer remitting tax payments by ETP must notify the department of any change in bank or account number by the twenty-third day of the month in which the next electronic payment is due or on the last workday immediately preceding the twenty-third day if the twenty-third day falls on a Saturday, Sunday, or holiday.
Source: 17 SDR 4, effective July 18, 1990; 21 SDR 219, effective July 1, 1995; 29 SDR 177, effective July 2, 2003.
General Authority:SDCL 10-45-47.1(2), 10-46-35.1(2), 10-46A-19(2), 10-46B-18(2).
Law Implemented:SDCL 10-59-32.
64:01:01:26. Dishonored transaction -- Fee. The charge is $20 for collecting an ETP payment which was not paid to the department because the transaction was not honored for the reasons set forth in SDCL 57A-3-421.
Source: 17 SDR 4, effective July 18, 1990.
General Authority:SDCL 57A-3-421.
Law Implemented:SDCL 10-59-32, 57A-3-421.
64:01:01:27. Taxpayer to retain confirmation number from ETF and ETP transactions for three years. The confirmation number received by the taxpayer from the operator or internet filing in an ETF and ETP transaction must be retained by the taxpayer in the taxpayer's records for at least three years.
Source: 17 SDR 4, effective July 18, 1990; 21 SDR 219, effective July 1, 1995; 29 SDR 177, effective July 2, 2003.
General Authority:SDCL 10-45-47.1(2), 10-46-35.1(2), 10-46A-19(2), 10-46B-18(2).
64:01:01:28. Audit review. Prior to the issuance of a certificate of assessment, the department shall furnish a taxpayer with a proposed list of taxable items. The taxpayer may review these lists. The department, in its discretion, may hold a closing conference telephonically if a closing conference is requested by the taxpayer. At the closing conference the taxpayer may object to any of the proposed taxable items listed.
Source: 17 SDR 4, effective July 18, 1990; 20 SDR 103, effective January 10, 1994; 21 SDR 219, effective July 1, 1995.
General Authority:SDCL 10-45-47.1, 10-46-35.1, 10-46A-19, 10-46B-18.
64:01:01:29. New facilities refund or delay in payment -- Commencement of project. For purposes of qualifying for a refund or delay in payment of tax under SDCL chapter 10-45, chapter 10-45B, chapter 10-46C, or SDCL 49-34A-80 to 49-34A-92, inclusive, commencement of the project means: (1) The first date earth is excavated for the purposes of constructing a project in the case of new construction or the expansion of an existing building or structure; (2) The beginning of modification or preparation of an existing facility for installation of production equipment; or (3) The delivery of production equipment to the purchaser if prior preparation is not required.
Source: 18 SDR 3, effective July 14, 1991; 21 SDR 219, effective July 1, 1995; 28 SDR 69, effective November 21, 2001; 28 SDR 178, effective July 1, 2002; 30 SDR 40, effective September 29, 2003; 31 SDR 214, effective July 6, 2005.
General Authority: SDCL 10-45-47.1(3), 10-45-103, 10-45B-12, 10-46-35.1(3), 10-46C-8(3), 49-34A-92.
Law Implemented: SDCL 10-45-103, 10-45B-6, 10-46C-6, 49-34A-80, 49-34A-81, 49-34A-86.
64:01:01:30. New facilities refund -- Application for permit. The owner of the project or the owner's authorized representative must sign the application for a permit authorized by SDCL 10-45B-6 or 49-34A-86. The application shall be accompanied by copies of the cost estimates for the project and the construction contract, purchase orders, or other documents showing the costs or prospective costs of the project.
Source: 18 SDR 3, effective July 14, 1991; 21 SDR 219, effective July 1, 1995; 28 SDR 69, effective November 21, 2001.
General Authority:SDCL 10-45-47.1(1), 10-45B-12, 10-46-35.1(1), 49-34A-92.
Law Implemented:SDCL 10-45B-6, 49-34A-86.
64:01:01:31. New facilities refund -- Documentation to support claim. A claim for refund must be accompanied by a list of suppliers or contractors from whom property or services were purchased. The list must include the sales tax license number or contractors' excise tax license number of each payee and the amounts paid to each payee. The claimant must include with the claim copies of the invoices or billings from each payee along with copies of the claimant's cancelled check or other proof of payment.
Source: 18 SDR 3, effective July 14, 1991; 21 SDR 219, effective July 1, 1995; 28 SDR 69, effective November 21, 2001.
General Authority:SDCL 10-45-47.1(4), 10-45B-12, 10-46-35.1(4), 49-34A-92.
Law Implemented:SDCL 10-45B-6, 10-45B-7, 49-34A-86.
64:01:01:32. Electronic or digital signature. A taxpayer's unique password and PIN that are transmitted in conjunction with a return filed through any electronic means constitute a signature.
Source: 25 SDR 167, effective July 1, 1999.
General Authority:SDCL 10-59-38(2).
Law Implemented:SDCL 10-59-37.
64:01:01:33. Application for direct payment permit. Each applicant for a direct payment permit must apply in writing to the secretary and the application shall be on a form provided by the secretary. The application shall contain the applicant's address, the location of the place or places of business for which the applicant intends to make direct payment of tax, each sales and use tax permit number for which direct payment will be made, and information necessary to determine eligibility pursuant to § 64:01:01:34.
Source: 28 SDR 69, effective November 21, 2001.
General Authority:SDCL 10-46-67.
Law Implemented:SDCL 10-46-67.
64:01:01:34. Qualification process and requirements for direct payment permit holders. An applicant for a direct payment permit shall meet the following minimum requirements:
(1) Demonstrate the applicant's ability to comply with the department's sales and use tax laws and reporting and payment requirements. The applicant must provide a description of the accounting system used by the applicant and demonstrate that the accounting system reflects the proper amount of tax due;
(2) Establish a business purpose for seeking a direct payment permit and must demonstrate that direct payment benefits tax compliance. For example, the utilization of direct payment authority shall accomplish one or more of the following:
(a) Reduce the administrative work of determining taxability; collecting, verifying, calculating, or remitting the tax;
(b) Provide for accurate compliance in circumstances where determination of taxability of the item is difficult or impractical at the time of purchase;
(c) Provide for more accurate calculation of the tax where new or electronic business processes such as electronic data interchange, evaluated receipts settlement, or procurement cards are utilized; or
(d) Provide for more accurate determination and calculation of tax where significant automation or centralization of purchasing or accounting processes have occurred and applicant must comply with the laws and regulations of multiple state and local jurisdictions;
(3) Has a volume threshold of annual purchases of tangible personal property, products transferred electronically, and services of at least $3 million, which are subject to sales and use taxes;
(4) File and pay or agree to file and pay monthly sales and use tax returns;
(5) File and pay or agree to file and pay by electronic means; and
(6) Agree that its name may be published as a direct payment permit holder on the department's website and in any other related publication, and may be disclosed as a direct payment permit holder in any other manner for tax administration purposes.
The secretary shall review each direct payment permit application. When the department approves the issuance of a direct payment permit, the department shall assign the business a direct payment permit and send the business a direct payment permit. The permit applies only to the business to which it is issued and may not be used by a subsidiary or an affiliate of the business. If a business that has a direct payment permit restructures its business into a new business entity, the new entity must apply for a permit of its own.
Source: 28 SDR 69, effective November 21, 2001; 35 SDR 48, effective September 8, 2008.
General Authority: SDCL 10-46-67.
Law Implemented: SDCL 10-46-67.
64:01:01:35. Record keeping requirements for direct payment permit holders. A direct payment permit holder shall maintain all records necessary for a determination of the correct tax liability under SDCL chapters 10-45 and 10-46. All required records must be made available on request by the department or its authorized representative.
Source: 28 SDR 69, effective November 21, 2001.
General Authority:SDCL 10-46-67.
Law Implemented:SDCL 10-46-67.
64:01:01:36. Reporting of tax for direct payment permit holders. Each holder of a valid direct payment permit shall, by electronic means accrue and pay directly to the department the taxes due under SDCL chapters 10-45 and 10-46 for each transaction subject to tax. Taxes for which the direct payment permit is used shall be considered due and payable on the sales and use tax return next due following the date on which a determination of taxability is, or in the exercise of reasonable care should be, made for a given transaction, unless otherwise provided by written agreement between the taxpayer and the department.
Source: 28 SDR 69, effective November 21, 2001.
General Authority:SDCL 10-46-67.
Law Implemented:SDCL 10-46-67.
64:01:01:37. Certain transactions not permitted for direct payment permit holders. The holder of a direct pay permit may not use the permit in connection with the following transactions:
(1) Purchase of taxable meals or beverages;
(2) Purchase of taxable lodging or services related thereto;
(3) Purchase of admission to places of amusement, entertainment, or athletic events, or the privilege of use of any amusement device;
(4) Purchase of any motor vehicle, or other tangible personal property required to be licensed or titled with a taxing authority, taxed under SDCL title 32;
(5) Purchase of any of the following enumerated services listed in SDCL chapter 10-45; telecommunications services, and utilities. Utilities include gas, electricity, and heating fuel; and
(6) Any other purchase as may be agreed to in writing between the holder of the direct payment permit and the department.
Source: 28 SDR 69, effective November 21, 2001.
General Authority:SDCL 10-46-67.
Law Implemented:SDCL 10-46-67.
64:01:01:38. Duties of direct payment permit holders. The holder of a direct payment permit shall furnish a copy of the direct payment permit or other acceptable evidence to each vendor from whom the holder purchases tangible personal property, products transferred electronically, or services. Acceptable evidence must show the holder's direct payment permit number. Any business who holds a direct payment permit is not required to pay the tax as prescribed in SDCL chapter 10-45 except on certain transactions not permitted as listed in § 64:01:01:37.
The holder of a direct payment permit shall have responsibility for accruing and paying tax directly to the department on each taxable transaction not taxed at the time of purchase. The holder must maintain accounting records in sufficient detail to show in summary, and in respect to each transaction, the amount of sales or use taxes paid to vendors in each reporting period.
Source: 28 SDR 69, effective November 21, 2001; 35 SDR 48, effective September 8, 2008.
General Authority: SDCL 10-46-67.
Law Implemented: SDCL 10-46-67.
64:01:01:39. Responsibilities of vendors selling to direct payment permit holders. Receipt of the direct payment permit or other acceptable evidence that the holder has been granted a direct payment permit shall relieve the vendor of the responsibility of collecting the sales tax on sales made to a direct payment permit holder except on certain transactions not permitted as listed in § 64:01:01:37. Any vendor and seller who makes sales upon which the tax is not collected by reason of the provisions of this rule shall maintain records in such manner that the amount involved and identity of the purchaser may be ascertained. Receipts from such sales are not subject to the tax levied in SDCL chapter 10-45.
Source: 28 SDR 69, effective November 21, 2001.
General Authority:SDCL 10-46-67.
Law Implemented:SDCL 10-46-67.
64:01:01:40. Payment of municipal taxes for direct payment permit holders. A direct payment permit holder that makes a taxable purchase of tangible personal property, any product transferred electronically, or services shall report and pay applicable municipal use tax on the taxable purchases. The municipal use tax shall be calculated at the rate imposed by the jurisdiction in which taxable use occurs.
Source: 28 SDR 69, effective November 21, 2001; 35 SDR 48, effective September 8, 2008.
General Authority: SDCL 10-46-67.
Law Implemented: SDCL 10-46-67, 10-52-4.
64:01:01:41. Revocation of direct payment permit. A direct payment permit is not transferable, and the use of a direct payment permit may not be assigned to a third party. Direct payment permits may be revoked by the secretary whenever the secretary determines that the business holding the permit has not complied with the provisions of this regulation or that the revocation is in the best interests of the department. The holder of a direct payment permit may contest a revocation pursuant to the provisions of SDCL chapter 1-26.
Source: 28 SDR 69, effective November 21, 2001.
General Authority:SDCL 10-46-67.
Law Implemented:SDCL 10-46-67.
64:01:01:42. Definitions of terms used in recordkeeping and retention regulations. Terms used in §§ 64:01:01:43 to 64:01:01:51, inclusive, mean:
(1) "Database management system," a software system that controls, relates, retrieves, and provides accessibility to data stored in a database;
(2) "Electronic data interchange" or "EDI technology," the computer-to-computer exchange of business transactions in a standardized structured electronic format;
(3) "Hard copy," any documents, records, reports, or other data printed on paper;
(4) "Machine-sensible record," a collection of related information in an electronic format. Machine-sensible records do not include hard-copy records that are created or recorded on paper or stored in or by an imaging system such as microfilm, microfiche, or storage-only imaging systems;
(5) "Storage-only imaging system," a system of computer hardware and software that provides for the storage, retention, and retrieval of documents originally created on paper. It does not include any system, or part of a system, that manipulates or processes any information or data contained on the document in any manner other than to reproduce the document in hard copy or as an optical image;
(6) "Taxpayer," any person subject to any of the taxes or fees provided for in SDCL chapters 10-45, 10-45D, 10-46, 10-46A, 10-46B, 10-47B, and 10-52A.
Source: 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.
General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46A-19(4), 10-46B-18(4), 10-46E-11(4), 10-47B-2, 10-52A-7(4).
Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-39, 10-46A-7, 10-46B-6, 10-46E-8, 10-47B-157, 10-52A-6.
64:01:01:43. Maintenance and access to taxpayer records. A taxpayer shall maintain all records necessary to make a determination of the correct tax liability. The records shall include: records and books of account for all receipts and sales, invoices, bills of lading, copies of bills of sale, and other pertinent papers and documents.
If a taxpayer retains records in both machine-sensible and hard-copy formats, the taxpayer shall make the records available to the department in machine-sensible format upon request by the department.
Source: 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.
General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46A-19(4), 10-46B-18(4), 10-46E-11(4), 10-47B-2, 10-52A-7(4).
Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-39, 10-46A-7, 10-46B-6, 10-47B-157, 10-46E-8, 10-52A-6.
64:01:01:44. Requirements for machine-sensible records. Machine-sensible records used to establish tax compliance shall contain sufficient transaction-level detail information so that the details underlying the machine-sensible records can be identified and made available to the department upon request. Sufficient transaction-level detail includes, at a minimum, vendor name, invoice date, product description, quantity, price, amount and type of tax, and shipping information. A taxpayer may discard duplicate records and redundant information provided its responsibilities under this chapter are met.
At the time of an examination, the retained records must be capable of being retrieved and converted to a standard record format that facilitates use of the records by the department during an examination.
A taxpayer that does not create the electronic equivalent of a traditional paper document in the ordinary course of business is not required to construct such a record for tax purposes.
Source: 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.
General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46A-19(4), 10-46B-18(4), 10-46E-11(4), 10-47B-2, 10-52A-7(4).
Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-39, 10-46A-7, 10-46B-6, 10-46E-8, 10-47B-157, 10-52A-6.
64:01:01:45. Requirements for electronic data interchange. If a taxpayer uses electronic data interchange processes and technology, the level of record detail, in combination with other records related to the transactions, must be equivalent to that contained in an acceptable paper record. The retained records shall include vendor name, invoice date, product description, quantity, price, amount and type of tax, and shipping information. Codes may be used to identify the data elements, provided that the retailer provides a code list or other method to allow the department to interpret the coded information.
The taxpayer may capture the necessary information at any level within the accounting system and need not retain the original EDI transaction records provided the audit trail, authenticity, and integrity of the retained records can be established.
Source: 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.
General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46A-19(4), 10-46B-18(4), 10-46E-11(4), 10-47B-2, 10-52A-7(4).
Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-39, 10-46A-7, 10-46B-6, 10-46E-8, 10-47B-157, 10-52A-6.
Example: A taxpayer using electronic data interchange technology receives electronic invoices from its suppliers. The taxpayer decides to retain the invoice data from completed and verified EDI transactions in its accounts payable system rather than retaining the EDI transactions. Since neither the EDI transaction nor the accounts payable system captures information from the invoice pertaining to product description and vendor name (i.e., they contain only codes for that information), the taxpayer also retains other records, such as its vendor master file and product code description lists and makes them available to the department. In this example, the taxpayer need not retain its EDI transaction for tax purposes.
64:01:01:46. Description of process that creates records. Upon the request of the department, the taxpayer shall provide a description of the business process that created the records. The description shall include the relationship between the records and the tax documents prepared by the taxpayer and the measures employed to ensure the integrity of the records.
The taxpayer shall be capable of demonstrating:
(1) The functions being performed as the functions relate to the flow of data through the system;
(2) The internal controls used to ensure accurate and reliable processing; and
(3) The internal controls used to prevent unauthorized addition, alteration, or deletion of the records.
Source: 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.
General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46A-19(4), 10-46B-18(4), 10-46E-11(4), 10-47B-2, 10-52A-7(4).
Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-39, 10-46A-7, 10-46B-6, 10-46E-8, 10-47B-157, 10-52A-6.
64:01:01:47. Maintenance of machine-sensible records. The department recommends but does not require that taxpayers refer to the National Archives and Record Administration's (NARA) standards for guidance on the maintenance and storage of electronic records, such as the labeling of records, the location and security of the storage environment, the creation of back-up copies, and the use of periodic testing to confirm the continued integrity of the records.
The taxpayer's computer hardware or software shall accommodate the extraction and conversion of retained machine-sensible records in a standard record format that will facilitate use of the records by the department during an examination.
The following specific documentation is required for machine-sensible records retained pursuant to this section:
(1) Record formats or layouts;
(2) Field definitions (including the meaning of all codes used to represent information);
(3) File descriptions (e.g., data set name); and
(4) Detailed charts of accounts and account descriptions.
Source: 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.
General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46A-19(4), 10-46B-18(4), 10-46E-11(4), 10-47B-2, 10-52A-7(4).
Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-39, 10-46A-7, 10-46B-6, 10-46E-8, 10-47B-157, 10-52A-6.
Collateral Reference: The NARA standards may be found at 36 C.F.R., Part 1234, July 1, 1995, edition.
64:01:01:48. Access to machine-sensible records. The manner in which the department is provided access to machine-sensible records as required in § 64:01:01:43 may be satisfied through a variety of means that shall take into account a taxpayer's facts and circumstances through consultation with the taxpayer. Any costs associated with providing access to machine-sensible records are the taxpayer's responsibility.
The taxpayer shall provide access by using one or more of the following means:
(1) Arrange to provide the department with the hardware, software, and personnel resources to access the machine-sensible records;
(2) Arrange for a third party to provide the hardware, software, and personnel resources necessary to access the machine-sensible records;
(3) Convert the machine-sensible records to a standard record format specified by the department, including copies of files, on a medium that is agreed to by the department; or
(4) Negotiate with the department on other means of providing access to the machine-sensible records.
Source: 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.
General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46A-19(4), 10-46B-18(4), 10-46E-11(4), 10-47B-2, 10-52A-7(4).
Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-39, 10-46A-7, 10-46B-6, 10-46E-8, 10-47B-157, 10-52A-6.
64:01:01:49. Taxpayer creation of machine-sensible records for department examination and responsibility for records. A taxpayer may create files solely for the use of the department. The taxpayer shall document the process that created the separate file to show the relationship between that file and the original records.
A taxpayer may contract with a third party to provide custodial or management services of the records. The contract does not relieve the taxpayer of its responsibility to maintain records.
Source: 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.
General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46A-19(4), 10-46B-18(4), 10-46E-11(4), 10-47B-2, 10-52A-7(4).
Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-39, 10-46A-7, 10-46B-6, 10-46E-8, 10-47B-157, 10-52A-6.
64:01:01:50. Requirements for conversion of hard-copy records to an imaging system. For purposes of storage and retention, taxpayers may convert hard-copy documents received or produced in the normal course of business and required to be retained under this regulation to microfilm, microfiche, or other storage-only imaging systems and may discard the original hard-copy documents, provided the conditions of this section are met. Documents which may be stored on these media include general books of account, journals, voucher registers, general and subsidiary ledgers, and supporting records of details, such as sales invoices, purchase invoices, exemption certificates, and credit memoranda.
Microfilm, microfiche, and other storage-only imaging systems shall meet the following requirements:
(1) Documentation establishing the procedures for converting the hard-copy documents to microfilm, microfiche, or other storage-only imaging system must be maintained and made available on request. The documentation shall, at a minimum, contain a sufficient description to allow an original document to be followed through the conversion system as well as internal procedures established for inspection and quality assurance;
(2) Procedures must be established for the effective identification, processing, storage, and preservation of the stored documents and for making the stored documents available for the period they are required to be retained;
(3) Upon request by the department, a taxpayer must provide facilities and equipment for reading, locating, and reproducing any documents maintained on microfilm, microfiche, or other storage-only imaging system;
(4) Whether displayed on equipment or reproduced on paper, the documents must exhibit a high degree of legibility and readability. For this purpose, legibility is defined as the quality of a letter or numeral that enables the observer to identify it positively and quickly to the exclusion of all other letters or numerals. Readability is defined as the quality of a group of letters or numerals being recognizable as words or complete numbers;
(5) All data stored on microfilm, microfiche, or other storage-only imaging systems must be maintained and arranged in a manner that permits the location of any particular record; and
(6) If the department determines that the microfilm, microfiche, or other storage-only imaging system lacks authenticity or integrity the department is not required to use the microfilm, microfiche, or other storage-only imaging system.
Source: 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.
General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46A-19(4), 10-46B-18(4), 10-46E-11(4), 10-47B-2, 10-52A-7(4).
Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-39, 10-46A-7, 10-46B-6, 10-46E-8, 10-47B-157, 10-52A-6.
64:01:01:51. Effect of maintaining machine-sensible records on hard-copy recordkeeping requirements. Except as otherwise provided in §§ 64:01:01:42 to 64:01:01:51, inclusive, the provisions of this section do not relieve taxpayers of the responsibility to retain hard-copy records that are created or received in the ordinary course of business as required by existing law and regulations.
Hard-copy records generated at the time of a transaction using a credit card or debit card must be retained unless all the details necessary to determine correct tax liability relating to the transaction are subsequently received and retained by the taxpayer in accordance with this regulation.
Computer printouts that are created for validation, control, or other temporary purposes need not be retained.
Nothing in this section prevents the department from requesting hard-copy printouts in lieu of retained machine-sensible records at the time of examination.
Source: 28 SDR 178, effective July 1, 2002; 32 SDR 225, effective July 3, 2006.
General Authority: SDCL 10-45-47.1(4), 10-45D-13(4), 10-46-35.1(4), 10-46A-19(4), 10-46B-18(4), 10-46E-11(4), 10-47B-2, 10-52A-7(4).
Law Implemented: SDCL 10-45-45, 10-45D-12, 10-46-39, 10-46A-7, 10-46B-6, 10-46E-8, 10-47B-157, 10-52A-6.
64:01:01:52. Effective date of rate changes. The effective date of rate changes for services covering a period starting before and ending after the statutory effective date shall be as follows:
(1) For a rate increase, the new rate shall apply to the first billing period starting on or after the effective date; and
(2) For a rate decrease, the new rate shall apply to bills rendered on or after the effective date.
Source: 29 SDR 177, effective July 2, 2003.
General Authority:SDCL 10-45-47.1(2), 10-46-35.1(2), 10-46A-19(2), 10-46B-18(2).
Law Implemented:SDCL 10-45-30.1, 10-45-30.2.
64:01:01:53. Effective date local rate changes -- Sales from preprinted catalogs. The local sales tax rate applies to any purchase from a seller's printed catalog if the purchaser computes the tax based upon local tax rates published in the printed catalog.
However, if the seller did not receive notice of a local sales tax change at least 120 days before the first day of the calendar quarter, the department will not enforce the local sales tax change until the following calendar quarter.
Source: 30 SDR 211, effective July 1, 2004.
General Authority:SDCL 10-52-4.
Law Implemented:SDCL 10-52-9.
