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Accounting Methods When using the accrual method, taxes must be paid on all sales made during the reporting period, even if you have not received payment. An exception is a conditional sale. When payments for the principal sum are extended over a period longer than 60 days from the date of the sale, only the payment received during each reporting period is subject to sales tax. When you report using the accrual method, you may take credit for bad debts during the reporting period in which you write the bad debt off as uncollectible in your books and records. Bad debts are eligible to be deducted for federal income tax purposes. When you use the cash method of accounting, you report gross receipts and pay tax as you receive payments. No bad debts are allowed on the cash method. Click here to fill out the changes in accounting method form online or notify the department in writing. Record Keeping Record keeping is a responsibility of not only those paying sales tax or contractor's excise tax, but also individuals paying use tax and any person purchasing products or services for storage, use, or other consumption in the state. Keeping accurate and complete records makes filling out tax returns and other reports easier. It also helps us correctly determine your tax liabilities during an audit of business income, purchases, exemptions, and deductions. We may use the records to determine if you reported and paid your taxes correctly. You must keep your records for a minimum of three years or longer if you are depreciating capital assets. This includes both paper and electronic records. Records supporting the following are to be kept and presented upon request of the Department of Revenue: The amount of gross receipts and sales from all sources, including barter. The amount of all deductions, exemptions, or credits claimed. Businesses should keep the following books and records: • South Dakota sales, use, and contractor's excise tax returns and work papers • Federal income tax returns for the business Summary accounting records and source journals, such as: the check register, general ledger, sales journal, general journal, cash receipts journal, and any other records you use to record income and expenses • Sales invoices • Purchase invoices (accounts payable, receipts) Beginning and ending inventories . Bills of lading • Cancelled checks • Contracts • Exemption certificates for any sales for resale, sales to exempt entities, or other exemptions claimed . Depreciation schedules listing all assets acquired or disposed of during the audit period along with purchase or sales invoices for those assets Prime Contractor's Exemption Certificates Supporting documentation for all deductions and exemptions South Dakota Department of Revenue · Sales and Use Tax Guide ⚫January 2022 • 15

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