California Sales Tax Nonpayment Risk Checklist

California Sales Tax Nonpayment Risk Checklist

Understanding Sales Tax Nonpayment

Sales tax nonpayment occurs when a business fails to submit required sales tax to the

California Department of Tax and Fee Administration by the filing deadline. Retailers are liable for sales tax under California law, whether or not they collected it from customers.

The CDTFA begins collection procedures when payment is not received by the due date, triggering an administrative process that includes notices, penalties, and potential enforcement actions. Nonpayment, underpayment, and late payment all trigger similar CDTFA collection procedures and penalties under tax laws.

A 10 percent late payment penalty applies to any unpaid tax amount, and interest accrues monthly on the unpaid balance. The state’s system automatically flags accounts with missing or late payments and generates notices based on statutory requirements.

Why the CDTFA Issues Notices

The California Department of Tax and Fee Administration issues nonpayment notices because tax laws require official documentation of tax debts before enforcement can occur. Once a return due date passes without payment, the CDTFA system flags the account and generates notices following established statutory procedures under the Revenue and Taxation Code.

California tax laws require the CDTFA to maintain records of unpaid tax and pursue collection through established channels under the Sales and Use Tax Law. Recovery of outstanding balances is the state’s purpose at the notice stage, not immediate penalization.

Consequences of Ignoring Notices

Ignoring CDTFA collection procedures and penalties leads to escalating enforcement action under sales and use taxes regulations. The state assesses a 10 percent penalty on unpaid tax amounts, and interest continues to accrue monthly based on the IRS underpayment rate plus 3 percent.

Collection through liens against personal property, levies on bank accounts or wages, or referral to collection agencies may be pursued by the CDTFA. Seller’s permits may be revoked for businesses that fail to file returns or pay taxes on time under the Sales and Use Tax Law.

Taxpayers with debts exceeding $100,000 may be placed on the Top 500 Sales and Use Tax

Delinquencies list, which can trigger denial or suspension of professional or occupational licenses issued by other state agencies. Responding early to tax liability notices typically provides more resolution options than waiting for enforcement.

What Nonpayment Notices Do Not Mean

A California sales tax payment plan options notice is not a lien, levy, or wage garnishment. It is a formal statement that a tax liability exists and a payment request.

Criminal charges or convictions for tax fraud or evasion do not result from nonpayment alone under tax laws. Receiving a nonpayment notice does not make payment impossible or negotiation unavailable, as the CDTFA offers payment plans and administrative options in many cases.

Steps to Address Nonpayment

1. Locate all CDTFA documentation

Find the original notice, letter, or communication from the CDTFA. Write down the amount owed, the tax periods involved, the notice date, and any deadline stated in the document.

2. Verify the debt amount

Review your records of sales tax returns filed and payments made during the periods listed.

Check bank statements and accounting records to confirm whether the payment was sent.

3. Compare state claims to your records

Determine if the tax liability is accurate by comparing the amount the CDTFA states you owe against your filed sales tax return records and payment records. Document any discrepancy with supporting records if you believe an error exists.

4. Contact the CDTFA before the deadline

Call the phone number on the notice or visit the CDTFA website to discuss the debt. Have your account number, the notice, and your records available when you contact the department regarding your tax liability.

5. Ask about available options

Specifically ask whether you qualify for a payment plan, installment agreement, or other relief under the Revenue and Taxation Code. Request written confirmation of any arrangement discussed with CDTFA staff.

6. Request written confirmation

Obtain a written document from the CDTFA outlining the terms, payment amounts, and due dates if you arrange a payment plan or installment schedule.

7. Make the first payment

Pay according to the schedule agreed to, and keep proof of payment through receipts, bank statements, or online confirmation records to satisfy your tax liability.

8. Monitor your account

Periodically check your CDTFA account online or contact the department to confirm payments are being applied correctly and the account remains current.

9. Document all communications

Keep records of phone calls, dates, names of staff members spoken with, and any written agreements or confirmations from the CDTFA regarding your tax liability.

10. Request an appeal or adjustment if needed

Ask the CDTFA about the process for disputing the debt or requesting a recalculation through a

Petition for redetermination if you believe the tax liability is incorrect. Request instructions in writing.

Understanding Payment Plans and Liens

Even with an approved payment plan, the CDTFA retains authority to file liens on personal property under the Sales and Use Tax Law. The department may withhold filing a lien if the payment plan satisfies the debt within one year, you successfully follow the terms, and you have not had collection problems before.

Penalty and Interest Rates

California sales tax penalties for failure to pay equal 10 percent of the unpaid tax amount, as established by the Revenue and Taxation Code. Failure to file tax returns on time also triggers a

10 percent penalty under tax laws. Interest rates are based on the IRS underpayment rate plus

3 percent, evaluated every January and July, and applied monthly to the unpaid balance.

Common Errors to Avoid

Missing response deadlines in state notices result in additional tax penalties and escalated collection action. Failure to pay on time leads to penalties, while failure to file sales tax returns results in separate penalty assessments under sales and use taxes provisions.

Providing incomplete or inaccurate information to the CDTFA can delay the resolution of your tax liability. Failing to respond to follow-up notices allows enforcement to escalate even if earlier notices were addressed under the Sales and Use Tax Law.

Resolution Process

After you contact the CDTFA and address the nonpayment, the department processes your information and updates your account according to tax rates and penalty calculations. Payment plans allow you to pay the debt over time according to the agreed schedule, and taxpayers may file a Petition for redetermination to dispute assessments, though the CDTFA does not publish specific timeframes for account closure processing.

Facing State Enforcement or Payroll Tax Issues?

If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.