Indiana Sales Tax Enforcement Actions: What You
Need To Know
Introduction
Sales tax enforcement actions are formal notices and procedures the Indiana Department of
Revenue uses when it identifies a possible sales tax compliance issue with a business. These actions can include audits, assessments, tax collection activities, or steps to collect unpaid taxes, along with interest and penalties.
Knowing how the process works matters because deadlines and response requirements vary by notice type. When an enforcement action is ignored or mishandled, the state may escalate to a tax warrant, tax liens, or bank levy activity, which can increase tax liabilities and disrupt operations.
What This Issue Means
A sales tax enforcement action is a formal communication stating that the Indiana Department of Revenue believes a business owes unpaid sales tax or has incomplete or inaccurate sales tax filings. The notice may be a proposed assessment, a demand notice, an audit letter, or a lien notice, depending on the enforcement stage.
An enforcement action may also involve use tax concerns when purchases of tangible personal property were not taxed at the point of sale. In each case, the goal is to address a tax obligation tied to sales tax, Indiana sales tax, or related compliance issues for retail merchants.
Why The State Issued This Or Requires This
Indiana issues enforcement actions when it identifies a compliance gap in sales tax returns, payment history, or registration records. Common triggers include failure to file a tax return, failure to pay assessed sales tax by the deadline, or collecting sales tax from customers without remitting it to the state.
The state may also initiate an audit when filing patterns, sales tax nexus indicators, or third-party data suggest underreporting. These actions support tax compliance and tax policies by ensuring that sales and use taxes are reported and paid in accordance with state law.
What Happens If This Is Ignored
When a sales tax enforcement action is not addressed, the Indiana Department of Revenue typically escalates tax collection activity. Escalation may include added penalties for Failure to
File, interest charges for Late Payment, formal demands for payment, or issuance of a tax warrant.
If the account remains unresolved, the state may file tax liens against property, pursue bank levies, or refer the matter to the Indiana Attorney General or a collection agency. The longer the issue remains open, the higher the unpaid taxes balance typically becomes due to penalties and interest.
What This Does Not Mean
Receiving an enforcement action does not automatically mean criminal charges or tax fraud allegations will be filed. It also does not mean the business has lost the right to dispute the assessment or that the Indiana Department of Revenue has completed its full review.
An enforcement action is a notice of potential tax liabilities, not a final judgment. Resolution options often still exist, including an assessment appeal, record review, or other steps permitted by the State Department of Revenue.
Checklist: What To Do After Receiving A Sales Tax
Enforcement Action
Step 1: Read the notice and capture key details
Record the case number, assessment amount, tax type, and deadline shown on the notice.
Note whether the issue involves sales tax, Indiana sales tax, or use tax tied to tangible personal property.
Step 2: Confirm the response deadline
Verify whether the notice allows 60 days for an assessment appeal or only 20 days for a demand notice response. Deadlines run from the notice date, and missing them can increase tax liabilities and limit options.
Step 3: Identify the enforcement stage
Determine whether the notice is a proposed assessment, audit notice, demand notice, or tax lien warning. The stage affects what evidence is required and what tax enforcement steps may follow.
Step 4: Record Department of Revenue contact information
Write down the mailing address, phone number, and any assigned Tax Compliance Officer listed on the notice. Keep reference numbers available because the Department of Revenue often requires them during follow-up.
Step 5: Gather records for the period involved
Collect sales records, sales tax returns, payment confirmations, and exemption certificates tied to retail merchants' transactions. Separate documentation for prepared food or other taxable categories to support tax compliance review.
Step 6: Decide whether the assessment should be disputed
If the amount appears incorrect, prepare a written protest that explains the issue and the correction requested. Focus on the facts and include support tied to the tax return periods under review.
Step 7: Choose whether to request a hearing
If a protest is filed, decide whether a hearing is needed or whether written records are sufficient.
A hearing may help when the dispute involves the interpretation of use tax or sales tax nexus issues.
Step 8: Submit the protest using the correct method
File by mail to the Legal Division or submit through INTIME when available. Keep proof of delivery and copies of everything submitted to support the assessment appeal process.
Step 9: Consider payment options when full payment is not possible
If the amount is not disputed, contact the Indiana Department of Revenue to discuss payment options and a structured repayment plan. Ask how partial payments affect penalties, interest, and tax collection activity.
- 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 10: Document and follow up until closure
Keep a log of all calls, emails, and submissions, including dates and outcomes. Monitor for follow-up notices and respond promptly to reduce the risk of a tax warrant or tax liens.
What Happens After This Is Completed
After a response is submitted, the Indiana Department of Revenue reviews the protest, records, or payment, and may request additional documentation. If the matter involves an assessment appeal, the file is generally assigned to the Legal Division and may be reviewed by Legal
Operations before a hearing officer is assigned.
If a hearing is requested, a notice is issued with a docket number and instructions, and the hearing may be held by phone, in person, or via Teams. A final determination is typically issued as a Letter of Findings, a Memorandum of Decision, or an Order Denying Refund, depending on the case type and outcome.
Common Mistakes To Avoid
Missing deadlines is one of the most costly errors because a late response can trigger default collection actions. Confusing the 60-day protest window with a 20-day demand notice deadline also leads to missed opportunities for review.
Submitting disorganized records, failing to include required forms, and relying on verbal conversations without written follow-up often delays resolution. Paying without confirming how funds apply can create confusion, especially when penalties and interest continue to accrue.
Frequently Asked Questions
How long does a sales tax audit or enforcement action typically take
Indiana does not publish a standard timeline for audits or enforcement reviews. Duration depends on record volume, response speed, and the complexity of the tax liabilities involved.
Can a sales tax assessment be appealed in Indiana?
Yes, a written protest can be filed within 60 days of the proposed assessment date when that deadline applies. The protest must generally include supporting documentation and the required submission forms.
What if the amount cannot be paid in full
Contact the Indiana Department of Revenue to discuss available payment options and whether partial payments are acceptable. Early contact can reduce escalation into tax liens or a tax warrant.
What is the difference between an assessment and a lien
An assessment is the state’s determination of the amount of unpaid taxes owed. A lien is a legal claim that secures the state’s right to collect and can arise after unpaid taxes remain unresolved.
Can a representative contact the state on a taxpayer’s behalf
Yes, a tax professional, tax preparer, or tax attorney can communicate with the Department of
Revenue if a valid authorization is filed. This may be helpful when records are complex or multiple enforcement stages are involved.
Closing
An Indiana sales tax enforcement action can feel intense, but clear steps reduce confusion and protect options. Reading the notice, meeting deadlines, organizing records, and responding through the proper channel help control the process and reduce added penalties.
When the amount cannot be paid immediately, early communication with the Indiana
Department of Revenue can limit escalation. A timely response is often the most effective way to reduce tax liabilities and resolve the matter under state tax law.
Facing State Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement, and aren’t sure how to respond, our team can help you understand your options and next steps.
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