Delaware Sales Tax Enforcement Actions Checklist

Delaware Gross Receipts Tax Enforcement Actions

Checklist

Delaware's Division of Revenue issues gross receipts tax enforcement actions when a business fails to register for required licenses, file returns, pay taxes owed, or maintain proper records. These actions represent official state steps to collect unpaid taxes and ensure compliance with Delaware tax law. Gross receipts tax enforcement can include assessments, penalty notices, liens, or collection proceedings.

Understanding what an enforcement action means and how it progresses helps you respond appropriately and avoid further complications. Failing to address these notices typically results in escalated collection activity, including potential wage garnishment, bank account levies, or business license revocation. This checklist explains what enforcement actions are, what happens at each stage, and the typical steps involved in responding to them.

What This Issue Means

A gross receipts tax enforcement action is an official notice or legal document from

Delaware's Division of Revenue indicating that the state believes you owe unpaid gross receipts tax, have failed to file required tax returns, or have not complied with tax requirements. Enforcement actions can take several forms: formal assessments of tax owed, penalty notices, liens on property or business assets, or notices of collection proceedings.

The action represents a transition from standard filing and payment procedures to active state collection or enforcement of compliance. It signals that the state is taking

deliberate steps to secure payment or force compliance rather than simply reminding you of an overdue obligation. These enforcement actions seek to address your tax liability through formal legal processes.

Delaware does not have a state or local sales tax. Instead, Delaware imposes a gross receipts tax on sellers of goods and providers of services. This tax is levied on the seller, not the consumer, and GRT rates currently range from 0.0945% to 1.9914%.

Enforcement actions apply to this gross receipts tax, along with other state taxes, such as corporate income tax, withholding tax, and income tax, as well as business license requirements administered by the State of Delaware.

Why the State Issued This or Requires This

The Delaware Division of Revenue initiates enforcement actions when standard notices and follow-up procedures have not resulted in compliance or payment. Common triggers include unpaid gross receipts tax from filed returns, failure to file required tax returns, failure to register for a business license or gross receipts tax permit when needed, or significant discrepancies between reported receipts and taxes paid.

The state issues these actions to protect the integrity of the tax system and ensure that businesses operating in Delaware pay their fair share of taxes. Enforcement actions are a documented, formal step in the collection process, as required by state law, before specific, more serious collection tools can be used. The Director of Revenue oversees these enforcement procedures to maintain consistent tax revenue collection across all business types, including Delaware corporations, Limited Liability Companies, Limited

Partnerships, and general partnerships.

What Happens If This Is Ignored

Ignoring a gross receipts tax enforcement action typically results in escalated collection activity. The state may file a tax lien against your personal or business property, issue a notice of levy on bank accounts or wages, initiate collection proceedings, or seek to revoke your business license.

Each escalation step typically involves additional penalties and interest added to your original tax debt, along with collection costs. Without response or contact from the

Division of Revenue, the state will continue to pursue available collection remedies in accordance with state law and procedure. These penalties and interest accumulate daily, significantly increasing your total amount owed.

Delaware law specifically authorizes the Division of Revenue to garnish bank accounts for state tax debts under provisions found in the Delaware Code. If the Division attaches your bank account, your bank is required to hold funds you have on deposit (up to the amount you owe) for 20 days before sending the money to the state. This 20-day period allows you time to resolve any issues or make alternative payment arrangements.

What This Does NOT Mean

An enforcement action does not automatically mean criminal charges are being filed against you. It does not mean that your business will be immediately closed or that your assets will be seized without additional legal process. It does not mean you have lost the right to dispute the underlying tax assessment or penalties.

Receiving an enforcement action does not indicate the state has exhausted all administrative remedies or that your only remaining option is litigation in state court. You typically retain the right to request a hearing, provide documentation, or make payment

arrangements before collection escalates further. The Division of Revenue offers multiple opportunities for resolution before resorting to the most severe remedies.

Checklist: What to Do After Receiving or Identifying a

Gross Receipts Tax Enforcement Action

1. Step 1: Read the Entire Document Carefully

   Review the complete enforcement action notice. Identify the specific tax period or periods involved, the amount claimed, the type of enforcement action, and any deadline mentioned for response or payment.

2. Step 2: Locate the Contact Information

   Find the name, phone number, and mailing address of the Division of Revenue representative or office listed on the notice. Write down this information for your records and consider accessing the Delaware Taxpayer Portal for additional account information.

3. Step 3: Verify Basic Information

   Confirm that the business name, tax identification number, and address on the notice match your records. Note any discrepancies between what the state lists and your actual information, notably if you recently completed business registration or updated your registered agent information.

4. Step 4: Gather Relevant Business Records

   Collect receipts, records, tax return copies, payment records, and accounting documentation for the periods mentioned in the enforcement action. Organize these by

   date so they are easily accessible for review or submission. Include any exemption certificates if your business activities qualify for reduced tax rates.

5. Step 5: Calculate Your Current Debt

   Review the notice to determine the original tax amount, penalties, interest, and any other charges the state claims you owe. Confirm whether amounts have been paid since the notice was issued and calculate the total tax liability, including all interest charges.

6. Step 6: Note Any Deadlines in the Notice

   Identify specific dates for response, payment, or actions required by you. Document these dates on a calendar or task list to ensure you don't miss deadlines. Under

   Delaware law, you typically have 60 days from the date of mailing of a notice of proposed assessment to file a written protest with the Director of Revenue (30 days for withholding taxes).

7. Step 7: Determine Whether You Dispute the Assessment

   Review the tax periods and amounts claimed. Assess whether you believe the assessment is accurate based on your records, or whether you have questions about the calculation of the tax rate applied to your business.

8. Step 8: Contact the Division of Revenue

   Contact the person or office listed on the notice by phone or in writing. Explain that you have received the enforcement action and want to discuss your account, request clarification, or explore available options. You may also log in to the Delaware Taxpayer

   Portal to view additional account details.

9. Step 9: Request Specific Information If Unclear

   Ask the Division of Revenue to explain how the amount was calculated, which specific periods are involved, and what documentation they used to issue the assessment, if this information is not clear from the notice. Request clarification on how the applicable tax rate was determined for your business type.

10. Step 10: Ask About Available Response Options

    Inquire whether you can request a hearing to dispute the assessment, whether payment arrangements are available, or whether any administrative relief programs apply to your situation. If you dispute the assessment, you may file a written protest with the Director within the applicable deadline. Inquire about refund intercept programs if you anticipate receiving future state refunds.

11. Step 11: Document All Communications

    Keep written records of all phone calls, emails, and correspondence with the Division of

    Revenue. Note dates, names, and details of what was discussed. Create a user account on the Delaware Taxpayer Portal if you have not already done so for easier tracking of communications and submissions.

12. Step 12: Submit Requested Information Promptly

    If the Division of Revenue requests specific documentation or clarification, compile and submit it within the timeframe provided in writing rather than delaying. Use the Delaware

    Taxpayer Portal or the Delaware One Stop portal for electronic submissions when possible.

13. Step 13: Follow Up in Writing

    After phone conversations, send a brief email or letter summarizing the discussion and any agreements or next steps, along with a request for written confirmation from the

    Division of Revenue. Maintain copies of all correspondence for your records.

• Businesses often make preventable errors when responding to enforcement
• Ignoring the notice entirely does not make it disappear. The state will continue
• Making verbal promises without written confirmation can lead to
• When sending payments, clearly indicate in a cover letter which tax periods,
• Do not assume the assessment is accurate without review. If the enforcement
• Even if you cannot pay the full amount owed, contacting the Division of Revenue

14. Step 14: Determine If Legal or Professional Assistance Is Needed

    Evaluate whether you need support from a tax professional, accountant, or attorney to understand the assessment, prepare a response, or represent you in discussions with the state. Complex cases involving multiple tax periods or significant amounts may benefit from professional representation.

    What Happens After This Is Completed

    After you contact the Division of Revenue and respond to the enforcement action, the state typically reviews your submission and the information you provide. Depending on your response, the Division of Revenue may initiate a formal hearing process, adjust or withdraw the assessment, establish a payment plan, or continue collection proceedings.

    Processing timelines vary based on the complexity of the dispute and the current workload of the Division of Revenue. You will typically receive written follow-up correspondence outlining the state's decision or next steps. If you file a protest, the

    Director will reconsider the proposed assessment and grant you an oral hearing if you request one.

    If you establish a payment plan, you will typically be required to file an annual report of your payment status and maintain compliance with all current tax filing requirements.

    The Division may continue to monitor your account to ensure timely payments are made. Missing scheduled payments may restart collection proceedings.

    Common Mistakes to Avoid actions. Missing response deadlines is one of the most serious mistakes. If the notice includes a deadline for payment or response (typically 60 days for most taxes), missing that date can result in additional penalties or immediate escalation to more serious collection actions. collection activity and may escalate to liens, levies, or other enforcement without your participation. Submitting incomplete or disorganized documentation may cause delays or rejection of your response. If you provide supporting documents, ensure they are clear, complete, and organized by date. misunderstandings and disputes. If a Division of Revenue representative offers to adjust the assessment, establish a payment plan, or pause collection, request written confirmation before relying on that promise. Document all agreements in writing. which account, and which portion of the debt the payment is intended to cover.

    Always retain copies of documents, correspondence, and payment records you submit to the Division of Revenue. Do not assume the state has received something unless they confirm receipt through the Delaware Taxpayer Portal or written correspondence. action lists a tax amount you believe is incorrect, do not pay it without first investigating and contacting the Division of Revenue to understand how the tax liability was calculated. Review whether the correct tax rate was applied to your business type. to discuss your situation is essential. Payment arrangements or other options may be available. Delaying contact only increases interest charges and penalties.

    Frequently Asked Questions

    What is the difference between a gross receipts tax assessment and an enforcement action?

    An assessment is a determination by the state that you owe a specific amount of gross receipts tax. An enforcement action is a formal notice indicating that the state is now taking active steps to collect payment or enforce compliance with the assessment.

    Can I dispute a gross receipts tax enforcement action?

    Yes. You can typically request a hearing before the Division of Revenue to present evidence and arguments challenging the assessment. You must file a written protest