"The origin of the expression go pound sand is from a longer expression, not to know (have enough sense to) pound sand down a rathole. Filling rat holes with sand is menial work, and telling someone to pound sand down a hole is like telling them to go fly a kite. The expression dates to at least 1912 and is common in the midwestern United States."
To tell someone that what they want isn't going to happen. The concept of pounding sand is to do something pretty useless. You can hit sand all day long, it doesn't change at all. So by telling someone to "pound sand" you are telling them that they will never get their request.
The debt collecter threatened me but I told him to pound sand, that he wasn't going to get another dime out of me.