California Sales Tax Enforcement Actions Checklist
California sales tax enforcement actions are notices or communications sent by the California
Department of Tax and Fee Administration when there is a question about whether sales tax was properly collected, reported, or paid. These actions can be triggered by discrepancies in tax returns, missing filings, audits, or reports from third parties.
Receiving such a notice does not automatically mean you have committed fraud or owe a large amount—it typically means the state needs more information or clarification about your sales tax responsibilities. Understanding what triggered the action and responding appropriately helps prevent the issue from escalating to penalties, liens, or collection efforts.
What This Issue Means
This formal communication from the CDTFA requests information, payment, or an explanation about your sales tax compliance. The action might be a notice of proposed assessment, a demand for returns, an audit letter, or a request for documentation.
It represents the state’s identification of a potential discrepancy between what was reported and what the state believes was owed. This does not mean the state has made a final determination or that you are guilty of violating any law—it means an inquiry or review has begun.
Why the State Issued This or Requires This
The CDTFA initiates enforcement actions when several common situations occur. Mismatched information on filed returns, such as inconsistent gross sales figures or tax amounts, can trigger a review.
Failure to file a sales tax return when required, or filing returns that show no tax liability when the CDTFA has records suggesting otherwise, often leads to a notice. Third-party reports, such as information from credit card processors or marketplace platforms, may reveal sales activity that does not align with reported returns.
What Happens If This Is Ignored
If such an action is ignored, the CDTFA typically escalates the matter through multiple stages.
For a Notice of Determination, you have 30 days from the date the notice was mailed to file a
Petition for Redetermination or pay the amount due.
If you do neither within 30 days, a 10% finality penalty is automatically assessed on the unpaid tax. The state may issue follow-up notices with increasingly firm language and shorter response deadlines.
Once an assessment is issued and becomes final, the state can pursue collection actions. The
CDTFA must mail you a preliminary notice at least 30 days before filing a lien against your business or personal property. Other collection actions include garnishing wages or bank accounts or pursuing legal action. Interest continues to accrue on unpaid amounts, and penalties may be added.
What This Does NOT Mean
Receiving an enforcement action does not mean the CDTFA has already decided you owe money or that penalties will automatically be imposed. It does not mean your business is under criminal investigation or that you have broken the law intentionally.
An enforcement action does not mean the state has full access to your business records or that a sales tax audit of your entire operation is underway. Some enforcement actions are limited inquiries about specific items, and the action itself is an inquiry rather than a conviction.
Checklist: What to Do After Receiving This or Identifying
This Issue
Step 1: Locate and read the notice carefully
Locate the official CDTFA letter or notice and read the entire document from beginning to end, even if parts seem unclear. The notice should contain the main topic, such as audit, proposed assessment, or demand for return, along with the notice date and any response deadline.
The notice will identify who issued it and provide their contact information, the specific tax period or return year in question, and any reference number or case number. Review whether the notice includes an explanation of why it was sent.
Step 2: Gather basic information about your business
Business registration documents, if applicable, should be collected along with all sales tax returns filed for the period mentioned in the notice. Business records for that same period must include sales invoices and receipts, along with bank statements or accounting records showing income. Any periods when the business was not operating should be identified, if applicable, and documentation showing when sales tax registration first occurred should be gathered.
Step 3: Understand what the notice is asking for
Rereading the notice will help identify the specific question or request and clarify whether the state is asking for copies of documents, an explanation, or payment. It may address a specific period or multiple periods and may reference particular product categories or transaction types.
Determine whether it asks for documentation that may not be available, such as old invoices, and whether it mentions a specific transaction or type of sales activity.
Step 4: Determine your response deadline
The deadline date will be clearly stated in the notice and should be confirmed as either a response deadline or a payment deadline. For a Notice of Determination, you typically have 30 days from the date the notice was mailed to file a Petition for Redetermination. An extension option may be provided, and the number of days remaining until the deadline should be calculated. Extensions are not automatically granted and must be requested.
Step 5: Organize documents related to the issue
Documents that directly address what the notice asks about should be separated and organized into a folder with all relevant business records, either physical or digital. Each document should be labeled with dates for easy reference, and copies of the specific tax returns mentioned in the notice should be located. Any documentation showing when sales occurred or were reported should be gathered, along with any correspondence between the business and the CDTFA about this issue.
Step 6: Determine whether to request professional help
The complexity of the notice and the ability to respond independently should be reviewed, and the organization and completeness of business records should be assessed. Issues involving accounting, auditing, or specialized knowledge may benefit from assistance by a tax professional, accountant, or attorney. Seeking professional guidance is a normal step, not an admission of wrongdoing.
Step 7: Prepare your response
A clear, organized response should address each point in the notice and include copies, not originals, of documents supporting the response. The cover letter should explain the response and list the attached documents, which should be organized in a logical order. Plain, factual language without emotional or defensive tone is appropriate, and the response should answer the question asked without making assumptions about what the CDTFA believes.
Step 8: Submit your response before the deadline
The correct mailing address for CDTFA correspondence should be confirmed from the notice, and responses sent by mail should use certified mail to track delivery. Electronic submission options should be reviewed if the notice mentions them, and copies of everything sent should be kept for records. The date, method of submission, and any receipt or tracking number from certified mail should be documented and saved.
Step 9: Follow up if you hear nothing
At least 30 days should pass after submitting the response before checking for follow-up correspondence from the CDTFA. If no response is received within a reasonable time, the
CDTFA should be contacted using the case number from the original notice. Written confirmation that the response was received should be requested, along with information about the timeline for the state's review.
- No notice from the CDTFA should be ignored, even if it appears to contain an error.
- The stated deadline must not be missed, even if a complete response is not ready. The
- State enforcement actions and notices
- Payroll tax debt review and resolution
- Penalty and interest reduction options
- Payment plans and compliance solutions
- Representation before state tax agencies
Step 10: Respond to any follow-up notices promptly
Any additional requests for information from the CDTFA should be treated with the same priority as the original notice. The same process of organizing documents and preparing a clear response should be followed. Additional documentation should be provided if requested, even if it seems repetitive.
What Happens After This Is Completed
After you submit your response to an enforcement action, the CDTFA typically reviews the information and documents you provided. The state examines whether your records support the amounts reported on your tax returns and determines whether additional tax is owed.
During this review period, the state may request clarification or additional documentation. Once the CDTFA completes its review, it issues a written determination showing whether your returns
were correct, whether a small additional amount is due, or whether a larger adjustment is necessary.
Common Mistakes to Avoid
Ignoring the notice does not resolve the issue and typically makes things worse.
CDTFA should be contacted if additional time is needed, rather than submitting nothing by the deadline.
Frequently Asked Questions
Does receiving an enforcement action mean I am being audited?
Not necessarily. Some enforcement actions are limited inquiries about a specific issue, while others may lead to a broader audit.
Can I request an extension of the deadline in the notice?
The notice typically includes information about requesting an extension. Contact the CDTFA office listed on your notice to ask about this option before the deadline passes.
Can I appeal a determination if I disagree with it after my response?
Yes, California has an appeals process. If you receive a CDTFA notice of determination you disagree with, you have 30 days from the date the notice was mailed to file a petition for redetermination.
If you do not file a petition before the deadline, your liability becomes final, and you cannot appeal it. However, you may still dispute the amount by paying the tax in full and then filing a timely claim for refund.
Interest continues to accrue on unpaid tax during the appeal, so you may pay the tax amount while your appeal is pending to stop interest from accruing. Any overpayment will be refunded with interest if your appeal succeeds.
Will the CDTFA shut down my business because of an enforcement action?
An enforcement action itself does not result in business closure. Only if you fail to pay a final determination for an extended period might the state pursue collection actions.
Final Considerations
Receiving this type of notice is stressful, but it is a manageable administrative process. Taking time to understand what the notice says, organizing your records, and responding clearly and on time significantly improve the outcome.
The state’s goal is to ensure accurate tax reporting, not to punish businesses for honest mistakes or incomplete information. Awareness and clear action are your best tools in this situation.
Facing State Enforcement or Payroll Tax Issues?
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