Arkansas Sales Tax Enforcement Actions Checklist

Arkansas Sales Tax Enforcement Actions Checklist

Arkansas sales tax assessment notices are formal written communications issued by the

Department of Finance and Administration when the state identifies potential sales tax compliance issues. These notices typically begin when the DFA discovers unreported sales, underreported tax collections, or unfiled sales tax returns for registered businesses.

Assessment notices can range from audit requests for documentation to penalty assessments for unpaid taxes. Understanding what an assessment notice means and how to respond is critical because ignoring these notices can result in significant penalties, interest charges, and potential legal action against your business.

What This Issue Means

An Arkansas Notice of Proposed Assessment is a formal written notice from the DFA indicating that the state has identified or suspects a sales tax compliance problem with your business.

This notice may request records, demand payment of unpaid taxes, assess penalties, or notify you of an audit or investigation.

The notice represents the state’s formal step to address the compliance issue and collect any unpaid tax liability. Depending on the nature of the compliance problem and the stage of the state’s collection process, the specific type of assessment notice varies.

Why the State Issued This or Requires This

The DFA issues sales tax assessment notices based on several common triggers discovered through compliance monitoring. Unreported or underreported sales may have been identified based on audit records, third-party reports, or examination of your business records.

Your business may have failed to file required sales tax returns on time or at all. Alternatively, the state may issue assessment notices when collected sales tax was not remitted to the state, during routine audits, or when businesses have not filed returns for multiple reporting periods.

What Happens If This Is Ignored

Ignoring an Arkansas Notice of Proposed Assessment typically results in escalation of collection efforts and increased financial penalties. The DFA may issue additional notices, increase

penalty assessments, or place liens on your business assets or personal property through a

Certificate of Indebtedness.

Payment failures trigger the state’s authority to pursue collection through wage garnishment, bank levies, or seizure of business property as authorized by Arkansas law. Interest continues to accrue on unpaid balances at ten percent per annum, making the total amount owed grow over time and potentially affecting your ability to operate your business.

What This Does NOT Mean

Receiving an Arkansas Notice of Proposed Assessment does not mean your business has been criminally charged or that you are facing jail time. The assessment notice is an administrative collection action, not a criminal prosecution or final judgment against you.

Checklist: What to Do After Receiving This or Identifying

This Issue

1. Read the entire assessment notice carefully by reviewing all pages to understand exactly what the DFA is requesting or claiming, including specific tax periods, amounts, and reasons for the action.

2. Locate and organize all relevant business records by gathering sales records, tax returns, accounting documents, and payment records related to the tax periods mentioned in the notice.

3. Check your business registration status with the DFA by visiting the Arkansas

Department of Finance and Administration website or contacting the agency to confirm your current sales tax registration status.

4. Review all sales tax returns filed for the periods in question by locating copies of your filed sales tax returns and verifying the amounts reported and dates filed.

5. Verify payment records for the periods in question by collecting documentation that shows when sales tax payments were made to the state.

6. Determine if the assessment notice contains an assessment amount by reviewing the document to identify the specific dollar amount the DFA is claiming is owed, including

penalties and interest.

7. Contact the DFA to request clarification if any information is unclear by calling the

Arkansas Department of Finance and Administration at the phone number listed on the assessment notice.

8. Review the deadline for response listed in the notice by identifying the exact date by which the state expects a response, which is sixty days from service of the notice under

Arkansas law.

9. Decide whether you will file a protest with the Secretary or petition the Arkansas Tax

Appeals Commission by evaluating your situation and choosing the appropriate route within the statutory deadlines provided in the notice.

10. Prepare your written response by organizing documentation to address each claim or request in the assessment notice, and remember to send copies only while keeping originals for your records.

What Happens After This Is Completed

After you respond to an Arkansas Notice of Proposed Assessment, the DFA typically reviews your submission and supporting documentation. For assessments issued on or after January 1,

2023, administrative relief under Arkansas Code Section 26-18-404 is not available, and taxpayers must file petitions with the Arkansas Tax Appeals Commission.

The Arkansas Tax Appeals Commission petition deadline is ninety days from the date the

Department issues a proposed assessment. Processing times vary depending on the complexity of the case and the current workload of the reviewing body.

After receiving a Tax Appeals Commission petition, the DFA has sixty days to file an answer.

Within thirty days after a reply is filed or the deadline passes, the Commission must schedule a hearing.

Common Mistakes to Avoid

• Missing the deadline for response can result in a default determination in favor of the

state because the sixty-day deadline for filing a protest or the ninety-day deadline for

filing a Tax Appeals Commission petition cannot be extended beyond statutory limits.

• Sending incomplete or disorganized documentation delays resolution because submitted

records that are difficult to follow or that do not address the specific issues raised in the notice require additional review time.

• Not responding at all to the assessment notice allows the DFA to proceed with collection

actions, including filing a Certificate of Indebtedness without your input.

• Sending original documents instead of copies can result in lost or damaged records that

cannot be replaced.

• Failing to follow the submission instructions in the notice ensures your materials may not

be received by the correct department or reviewed promptly.

Frequently Asked Questions

Can I request an extension on the deadline to respond to the assessment notice?