Alabama Sales Tax Enforcement Actions Checklist

consider any penalty waiver request.

What Happens If This Is Ignored

Failing to address a sales tax penalty or interest notice allows the charges to continue accruing each month. The state may send additional notices or demand letters requesting payment.

Collection actions, including potential liens against business assets or personal property, may be pursued by the Alabama Department of Revenue if payment is not received within the timeframes specified in state notices. Alabama has a three-year statute of limitations for assessment, which begins from the later of the return due date or filing date.

A minimum ten-year collection period applies from the date the assessment becomes final and enforceable. Alabama sales tax constitutes a trust fund tax and is not dischargeable in bankruptcy proceedings.

What This Does NOT Mean

Receiving a penalty or interest notice does not mean the state has filed a lien or frozen accounts. Criminal prosecution has not been initiated; sales and use taxes are civil matters handled by the Sales and Use Tax Division.

Checklist: What to Do After Receiving This or Identifying

This Issue

• Step 1: Locate and review the penalty or interest notice

Finding the original notice from the Alabama Department of Revenue is the priority.

Noting the tax period, the penalty amount, the interest calculation, and the due date listed on the notice provides the foundation for addressing this issue.

• Step 2: Verify the sales tax return was filed for the period in question

Business records should be checked for the monthly or quarterly sales tax return.

Confirming the filing date against the Alabama state deadline for that period establishes whether the return was submitted within the required timeframe.

• Step 3: Verify the sales tax payment or determine the unpaid balance

Payment records, bank statements, or cancelled checks showing payment dates must be located. Calculating the difference between what was paid and what was owed identifies which months or quarters had late or incomplete payments.

• Step 4: Calculate the total amount owed

Adding the original sales tax liability, the penalty amount, and the accrued interest yields the current total. Creating a summary document that breaks down tax, penalty, and interest provides clarity on the next steps.

• Step 5: Contact the Alabama Department of Revenue to verify the calculation

Calling the Sales and Use Tax Division at (334) 242-1490 or visiting the website at revenue.alabama.gov allows for verification. Requesting confirmation that the penalty and interest amounts are correct ensures accuracy before making payment arrangements. Having the Sales Tax License number available when contacting the department expedites the verification process.

• Step 6: Determine the current total amount due, including newly accrued interest

Requesting a current account statement that shows the total balance, including all interest and penalties, is essential. Interest continues to accrue daily until payment is made in full, so obtaining the most recent balance prevents underpayment. The account statement will reference the license number associated with the outstanding balance.

• Step 7: If you disagree with the penalty assessment, gather documentation to

support the position

Documenting any business circumstances that affected timely filing or payment, such as illness, system failure, or other reasonable cause, strengthens the case. Collecting any proof that demonstrates a reasonable effort to comply, including partial payments or a prior clean compliance history, supports a penalty waiver request.

• Step 8: If penalties may be abatable, contact the Alabama Department of Revenue

to inquire about penalty relief

Asking about Alabama’s policy on penalty abatement or reduction for reasonable cause begins the waiver process. Understanding that interest is compulsory and continues to accrue regardless of penalty abatement sets realistic expectations for the final amount due.

• Step 9: Determine payment method and timeline

Confirming whether the full balance can be paid immediately helps determine the next course of action. Contacting the Collection Services Division at (334) 353-8096 becomes necessary if full payment is not feasible.

• Step 10: Organize all documentation in one place

Keeping copies of the penalty notice, account statement, and all supporting records together maintains organization. Including filing, payment, and amount dates from business records creates a complete file for reference. Documentation should include the Sales Tax License number and all correspondence related to the penalties and interest assessed.

• Step 11: Submit payment or a payment plan request

Following the payment instructions provided in the state notice ensures that the payment is processed correctly. Confirming receipt of any payment or plan request from the state verifies that the submission was received and recorded.

• Step 12: Follow up on the status of the account after submission

Allowing the state time to process payment or plan requests is reasonable, but follow-up prevents delays. Requesting written confirmation that the penalty, interest, and tax have been paid or are under a payment arrangement provides documentation of resolution.

What Happens After This Is Completed

After submitting payment or a payment plan request, the Alabama Department of Revenue processes the transaction and updates the account. Payment made in full stops the accrual of penalty and interest charges from the date of payment.

Establishing a payment plan allows interest to continue accruing on the unpaid balance until the balance is paid in full. The state suspends collection action once a formal payment plan is established and agreed to in writing, provided that all payments under the plan are made as scheduled.

Common Mistakes to Avoid

• Ignoring the notice or delaying response

Penalties and interest continue to accumulate daily. The longer the account remains unpaid, the larger the total debt becomes.

• Paying only part of the balance without a formal agreement

Partial payments made without confirming how they will be applied may not reduce the balance as expected. Confirming with the Alabama Department of Revenue how partial payments will be applied to the specific account before remitting payment prevents misunderstandings.

• Not requesting current account information before sending payment

Interest accrues daily at the current rate. Sending a check for an amount based on an old notice may not cover the current total due.

• Failing to respond to follow-up notices

Responding promptly to the state's additional notices or collection letters helps prevent escalation to liens or enforcement actions. Each notice represents an opportunity to resolve the matter before more serious consequences occur.

• Submitting incomplete payment plan requests

Including all financial information requested by the Collection Services Division when applying for a payment plan expedites the approval. Incomplete applications delay approval, and interest continues to accrue during the review period.

• Not keeping copies of all correspondence.

Maintaining records of all notices, payment confirmations, and agreements with the state helps prevent future disputes. These documents serve as proof of what was paid or promised, in case questions arise later.

Facing State Tax Enforcement Action?

If you’ve received a notice related to sales tax or payroll tax enforcement, and aren’t sure how to respond, our team can help you understand your options and next steps.

We help with

• State enforcement notices and responses
• Sales tax audits, assessments, and collections
• Payroll & trust fund tax enforcement issues
• Penalty and interest reduction options
• Payment plans and state tax relief eligibility
• Representation before state tax agencies

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