Colorado Unfiled Sales Tax Returns Checklist
Introduction
Unfiled sales tax returns occur when required sales tax filings have not been submitted to the
Colorado Department of Revenue for one or more reporting periods. These gaps in tax compliance often trigger notices, penalties, and interest, as well as potential collection activity related to state taxes.
Sales tax returns document taxable sales, the tax collected, and the amounts owed to state and local jurisdictions. Understanding why these returns matter and how to file missing sales tax returns helps reduce tax liabilities and prevent further enforcement.
What This Issue Means
An unfiled sales tax return exists when a business or individual required to collect sales tax fails to file a required return for a reporting period. Colorado requires filing even when no tax is due, making zero filing of the return a step in compliance.
Until the return is filed, the sales tax account reflects missing activity and incomplete tax obligations. This can interrupt tax clearance certificate requests and complicate future tax resolution efforts.
Why the State Issued This or Requires This
Colorado tax laws require businesses selling taxable tangible personal property to collect and remit sales tax, as well as file returns with the Colorado Department of Revenue. These filings allow the state to track state taxes, local taxes, and trust fund amounts collected from customers.
Notices are commonly issued when a sales tax license is obtained, but returns are never filed, filings stop unexpectedly, or a business misunderstands its filing requirements. Even companies with no sales must file a return for each period until a final return or Business Closure Form is accepted.
What Happens If This Is Ignored
When sales tax returns remain unfiled, the Colorado Department of Revenue may issue a
Notice of Deficiency or estimate tax liabilities using available data. Penalties and interest continue to accrue, increasing the total amount owed and narrowing resolution options.
Continued noncompliance may result in liens, levies, or referral for tax resolution actions similar to those employed by other agencies, such as the Internal Revenue Service. Ignoring notices can also increase audit exposure and shorten the audit window.
What This Does NOT Mean
An unfiled return notice does not automatically indicate fraudulent activity or tax evasion. It also does not mean penalties have been finalized or that enforcement action has already occurred.
The notice is a procedural step intended to prompt filing and restore tax compliance.
Businesses still have the opportunity to file returns, correct records, and address penalties before escalation.
Checklist: What to Do After Receiving a Notice or
Identifying This Issue
Step 1: Gather sales and financial records
Collect invoices, receipts, point-of-sale reports, and accounting records for each unfiled period.
Organize documents by reporting period to support accurate tax returns.
Step 2: Confirm filing frequency
Verify whether the account requires monthly, quarterly, or annual sales tax returns based on historical tax collected. Filing frequency affects due dates and the number of returns required.
Step 3: Review the notice details
Read the notice carefully to identify any missing periods, deadlines, and whether estimated tax liabilities have been assessed. Confirm the sales tax account number and contact information listed.
Step 4: Contact the Colorado Department of Revenue
Call the Department of Revenue to confirm which sales tax returns are unfiled and whether prior filings exist. Request clarification before filing to avoid duplicate or incorrect submissions.
Step 5: Obtain correct return forms
Download the appropriate sales tax return forms or access online options through the department’s webpage. Ensure forms match the reporting periods and account status.
Step 6: Calculate taxable sales
Determine taxable and exempt sales for each period using actual records rather than estimates.
Apply state and local tax rates correctly to avoid later adjustments.
Step 7: Complete each tax return
Fill out each return fully, including a zero filing of return when no sales occurred. Review entries carefully to ensure accuracy before submission.
Step 8: Copy and retain records
Make copies of all completed returns and supporting schedules for record-keeping compliance with regulations. Retained documentation supports future Refund Claim or audit requests.
Step 9: Submit returns properly
File returns by mail or file online as allowed, following the submission instructions provided.
Certified mailing may help document the filing date.
Step 10: Track submission dates
Record mailing dates, confirmation numbers, or electronic receipts. This documentation supports identity verification and proof of compliance.
Step 11: Monitor account updates
Check the sales tax account to confirm returns were processed and posted correctly. Follow up promptly if returns remain listed as missing.
- 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
Step 12: Address penalties and interest
Review any penalties and interest assessed after filing and ask about relief options such as a voluntary disclosure agreement or an offer in compromise. Keep written records of all communications.
What Happens After This Is Completed
Once unfiled sales tax returns are processed, the Colorado Department of Revenue updates the account and removes the unfiled status. Any tax liabilities shown on the returns are applied and reconciled against prior estimates.
If additional amounts remain due, the state issues a written notice outlining payment options or next steps. Ongoing monitoring ensures accurate posting and prevents repeat compliance issues.
Common Mistakes to Avoid
Delays often occur when businesses ignore notices or assume no filing is required during periods with no sales. Failure to submit a zero filing of return commonly triggers estimated assessments and added penalties.
Errors also arise from filing incorrect periods, missing local jurisdictions, or failing to keep copies of filed returns. Strong recordkeeping reduces exposure to penalties and interest and simplifies tax resolution.
Frequently Asked Questions
Do sales tax returns need to be filed if there are no sales?
Yes, Colorado requires a tax return for every period, even when no tax is due. Filing a zero return prevents estimated assessments.
Can multiple unfiled sales tax returns be filed together?
Yes, multiple periods may be filed at once, accompanied by a cover letter that lists all included returns. This helps the department process filings correctly.
Does filing remove penalties automatically?
No, penalties and interest generally remain unless relief is granted. Requests for penalty relief must be made separately.
Can returns be filed online?
Colorado allows taxpayers to file online through its official website once registered. Paper filing remains an option when online access is unavailable.
What if the estimated tax was assessed before filing?
Estimated amounts are adjusted once actual returns are filed. The final balance depends on reported sales and tax collected.
Is professional help required?
Hiring assistance, such as a Certified Tax Resolution Specialist, is optional and depends on the complexity of the situation. Many taxpayers successfully file returns themselves.
How long does processing take?
Processing time varies based on volume and filing method. Monitoring the account helps confirm completion.
What if the business has closed?
A final return and Business Closure Form should be filed to close the sales tax account. Contact the department for closure instructions.
Closing Section
Unfiled sales tax returns create compliance gaps that the Colorado Department of Revenue will eventually address through notices or enforcement actions. Filing missing sales tax returns promptly is the most effective way to reduce tax liabilities and restore tax compliance.
Maintaining accurate records, filing returns on time, and monitoring the sales tax account help avoid future issues. Early action simplifies resolution and supports long-term compliance with
Colorado tax regulations.
Facing State Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement and are unsure how to respond, our team can help you understand your options and next steps.
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