3 Things to Remember if You Get a Sales Tax Notice

Dan Barros
June 1, 2023

Have you ever received a sales tax notice from a state department of revenue? Whether you answered yes or no, there are important things to keep top of mind to help keep your business prepared.

Finding out that you have failed to comply with one or more of your sales tax obligations can be startling. However, resolving the issue quickly can save you from incurring more penalties.

Remember: it’s impossible to eliminate risk entirely. Instead, it’s more about minimizing liability and exposure and being ready when a sales tax notice does arrive.

Recognize an actual sales tax notice

The actual notice that you receive, notifying your company of a missed sales tax obligation, can be called various names.

These include, but are not necessarily limited to, the following:

  • Notice of Intent to Assess
  • Notice of Final Assessment
  • Filing Frequency Change
  • Notice of Balance Due
  • Notice of Failure to File
  • Notice of Routine Audit

Understand why you received the notice

Not all sales tax notices mean that your business has done something wrong. There are some that are informational or simply asking for your organization to send more data. Different types of notices could include:

  • Notices related to credits and/or refunds
  • Amnesty notices
  • Notices related to tax return discrepancies
  • Administrative notices (i.e., reminder to file, submission issues)
  • Rate updates
  • Account renewal notices
  • Changes to “accelerated monthly payment” status

Due to the variability involving sales tax notices and the ways they may arise, it is crucial that you understand what the notice is regarding and what is needed to resolve it.

The cost of doing nothing

Should a business opt to not take any action regarding a received notice, it’s important to understand the potential consequences. For example, this could lead to liens or the revocation of a license. It may also impact the attractiveness and value of the company when you are looking to sell.

Remember that making a mistake with your sales tax filing is one thing, but ignoring a sales tax notice is entirely different. It could make your company – and even the industry in which you operate – a bigger target for an audit. Furthermore, an auditor can take your inaction into account when conducting an audit. No business can guarantee that it never encounters an audit, but it’s not beneficial to ignore basic steps that can help to prevent them. A typical audit can take 30 to 45 days and cost companies anywhere from $100,000 to $300,000.

Overall, receiving a sales tax notice is not the end of the world. Be sure to contact whichever state agency that sent it – is this automatic? Was it triggered by a system delay or is something actually wrong? You can determine whether or not your company still owes sales tax or if a mistake was made. While stressful, it could be worth it to find out as much information as you can to know exactly how to move forward.

Take Action

Still have questions or concerns about the possibility of a sales tax notice? Reach out to our team to learn more.

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Dan Barros

Dan Barros is a Junior Regulatory Counsel in the Regulatory Analysis & Design Department at Sovos. Dan focuses on domestic sales and use taxes and related fees. He received his J.D. from New England Law | Boston and his B.A. in Economics from UMass Lowell. Dan is a member of the Massachusetts Bar.
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