Alabama Sales Tax Nonpayment Risk Checklist

Alabama Sales Tax Nonpayment Risk Checklist

Understanding Sales Tax Nonpayment

Sales tax nonpayment occurs when a registered sales tax account falls behind on payments owed to the Alabama Department of Revenue. Your account becomes delinquent when payment is not received by the due date shown on your return or notice.

Alabama tracks sales tax accounts through its filing and payment system, and when payment is missing, your account is marked as delinquent. This triggers the Alabama Department of

Revenue collection process, which follows established administrative procedures designed to recover unpaid tax liabilities.

Nonpayment can result from several situations. You may have failed to file a tax return entirely, or you filed but did not pay the tax shown. Partial payments that do not cover the full amount owed can also lead to delinquency. Collection procedures begin as part of standard administrative practice once your account shows an unpaid balance past the due date.

Why the State Pursues Collection

Alabama requires all registered sales tax dealers to pay sales tax by the due date prescribed by law. Legal obligations compel the Alabama Department of Revenue to collect taxes owed to fund state operations. When your account becomes delinquent, the department initiates collection procedures in accordance with established protocols.

Common triggers include missed payment deadlines, returned checks, incomplete payments, or accounts showing no recent payment activity. Systematic identification and pursuit of unpaid liabilities ensures compliance with state tax law across all tax types.

Consequences of Ignoring Nonpayment

Escalating collection efforts proceed through a series of actions when the Alabama Department of Revenue does not address nonpayment. A "Final Notice Before Seizure" arrives, giving you ten days to settle the debt. If you do not respond, the department issues legal writs such as garnishments or executions to the county sheriff.

Additional consequences include the assessment of penalties and interest on the unpaid amount, which can result in an increased total debt over time. Continued nonpayment can result in liens placed against your business or personal property, wage garnishment, where the state withholds 25 percent of your gross wages, or bank account garnishment, where the full amount in your account at the time of service is seized.

Suspension or revocation of your sales tax permit or other business licenses may occur under

Alabama Code Section 40-23-6.1 for unpaid tax liabilities. Tax delinquency creates serious financial and legal consequences that worsen the longer delinquent taxes remain unpaid.

Penalties and Interest Charges

Alabama imposes two separate penalties for nonpayment of sales tax. The failure to timely file a penalty equals the greater of 10 percent of the tax due or fifty dollars. For sales tax, the failure to timely pay penalty equals 10 percent of the unpaid amount. Both penalties can be assessed for the same tax period.

The maximum total penalty reaches 25 percent of the unpaid tax. Interest accrues on unpaid sales tax based on the federal underpayment rate established under 26 U.S.C. Section 6621, which is updated quarterly. For the first quarter of 2026, the annual rate stands at 7 percent.

The calculation of interest follows this formula: 7 percent divided by 365 equals the daily rate, multiplied by the number of days late, multiplied by the tax amount, equals the interest due.

Interest continues to accrue on the unpaid balance until the account is paid in full.

Steps to Address Sales Tax Nonpayment

• Step 1: Locate Your Nonpayment Notice

Find any written notice from the Alabama Department of Revenue about unpaid sales tax. If you have not received a notice but believe you may have unpaid tax, contact the department at 334-242-1100 to request your account status. Write down the account number, tax period, and amount shown on any notice you receive.

• Step 2: Verify the Amount Owed

Review your own records of sales tax filings and payments for the period in question.

Compare your records to any state notice you received and note any discrepancies between what you believe you owe and what the state claims.

Keep copies of all documentation, including filing confirmations, payment receipts, and canceled checks. Verify that each tax return was submitted correctly and that payments match the amounts due.

• Step 3: Contact the Alabama Department of Revenue

Call the department at 334-242-1100 or visit their website at revenue.alabama.gov.

Request a detailed account statement showing the unpaid balance, the tax periods involved, and any penalties or interest added.

Request the original due date and any deadlines shown on collection notices—request information about available payment options for various tax types administered by the department.

• Step 4: Explore Payment Options

Determine whether you can pay the full amount owed immediately. Payment plans may be available through the Collections Services Division at 334-242-1220 or through My

Alabama Taxes online when you cannot pay in full.

Payment plan requests must be submitted through My Alabama Taxes, and approval is not guaranteed. Collection action can proceed when a payment plan defaults, and the department may demand the full remaining balance. Interest continues to accrue while a payment plan is in place.

• Step 5: Submit Payment or Payment Plan Request

If paying in full, please send payment immediately, clearly identifying your account number and the tax periods being paid. If you are requesting a payment plan, please submit your request through My Alabama Taxes, following department procedures. Keep copies of all correspondence and payment records.

• Step 6: Request Penalty Waiver if Appropriate

Penalties may be waived upon determination of reasonable cause, which includes instances where you acted in good faith under Alabama Code Section 40-2A-11. Submit