This is one area where you really can't go too wrong. People run everything from bare bottom tanks to 4" deep sand beds and have great reef systems.
My personal preference is to use dry aragonite sand, one grade courser than "sugar sand", and use either just enough to cover the bottom or use a 4" deep sandbed.
However, I would not call some one else wrong if they were doing something different.
People do use all sorts of other, non-LFS, sources for sand. This can be a lower cost alternative, but I think your better off just buying it from your LFS. That way you know exactly what your getting.