Indiana Sales Tax Payment Plan & Resolution
Checklist
Introduction
Sales tax enforcement actions are formal notices and procedures the Indiana Department of
Revenue uses when it identifies a possible sales tax compliance problem. These actions can include audits, proposed assessments, demand notices, tax liens, and collection activity tied to unpaid taxes, interest, and penalties.
Prompt, accurate responses usually reduce risk and limit added charges, especially when unfiled returns or late payments are involved. When notices are ignored or mishandled, enforcement can escalate, affecting cash flow, operations, and the ability to resolve the tax debt on reasonable terms.
What This Issue Means
A sales tax enforcement action is a formal communication stating that the Indiana Department of Revenue believes sales tax returns, payments, or reporting are missing or inaccurate. The notice may involve sales tax, Indiana sales tax, or use tax connected to tangible personal property or other taxable transactions.
Depending on the stage, the notice can signal an audit review, a proposed assessment for tax liabilities, or active collection steps. It may also indicate the state is trying to verify compliance for a retail merchant account that should be filing and remitting sales tax.
Why The State Issued This Or Requires This
Indiana issues enforcement actions when its filing history, payment records, or third-party information suggest noncompliance with state tax laws. Common triggers include failure to file sales tax returns, underreporting taxable sales, late payments, or collecting sales tax without remitting it to the state.
In some cases, the issue starts when the state detects patterns tied to remote sellers, sales tax nexus, or Economic Nexus thresholds and expects registration or reporting. The Indiana
Department of Revenue uses enforcement to confirm the correct tax obligation and collect amounts it believes are due.
What Happens If This Is Ignored
When sales tax remains unpaid, the Indiana Department of Revenue typically escalates collection activity through additional notices, penalties, and interest. Failure to pay can trigger a
10 percent penalty on unpaid taxes, while failure to file can result in a 20 percent penalty, with interest continuing until the balance is resolved.
If the issue remains unresolved, the state may file a tax lien, initiate wage garnishments, impose bank levies, or refer the account to a collection agency. Continued inaction increases the likelihood of a tax warrant, County Sheriff involvement, and higher total tax debt that becomes harder to resolve.
What This Does Not Mean
Receiving a sales tax notice does not mean a tax lien has already been filed or that wages have been garnished. Early notices are intended to prompt compliance and still allow time to address unpaid taxes before enforcement escalates.
A sales tax balance also does not automatically indicate fraud or a criminal investigation unless the state specifically states otherwise. In many cases, the issue involves administrative compliance and can be addressed through filing corrections, penalty abatements when reasonable cause applies, or structured resolution options.
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 Indiana 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 merchant activity. Separate documentation for prepared food, exemptions, or special product categories if they affect how the tax return should be calculated.
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. Keep the explanation focused on the specific periods and figures tied to the proposed assessment.
Step 7: Choose whether a hearing is needed
If a protest is filed, decide whether a hearing is needed or whether written records are sufficient.
A hearing may be helpful when the issue involves tax compliance interpretations, documentation gaps, or a disputed use tax treatment.
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 in case the state requests confirmation later.
Step 9: Discuss resolution when full payment is not realistic
If the amount is not disputed, but full payment is not realistic, ask about installment agreements and other payment options through INTIME. Confirm how penalties, interest, and collection activity are handled while payments are being made.
- 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: Track progress and stay current going forward
Monitor account status and follow up if documents or payments are not reflected correctly.
Continue filing sales tax returns on time to avoid new enforcement while older tax debt is being resolved.
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. For assessment appeals, the file is usually assigned to the Legal Division and may be reviewed by Legal Operations before a hearing officer is assigned.
Common Mistakes To Avoid
Missing deadlines, confusing the 60-day protest window with the 20-day demand notice deadline, or submitting incomplete records can trigger default outcomes and faster collection activity. Paying without confirming how funds apply can also create confusion, especially when interest and penalties continue to accrue.
Frequently Asked Questions
How is a proposed assessment different from a demand notice?
A proposed assessment generally starts the dispute window and often allows 60 days for an assessment appeal. A demand notice is a collection-stage notice that may allow only 20 days to respond before escalation.
Can sales tax enforcement result in a tax lien or a tax warrant?
Yes, unresolved sales tax liabilities can escalate to a tax lien and then to the steps associated with a tax warrant. These actions can affect property transactions and may involve the County
Sheriff during collection activity.
Can an assessment be challenged if the amount seems wrong?
A written protest can be submitted when an assessment appeal is available, and it should include records supporting the requested correction. The Indiana Department of Revenue generally presumes assessments are correct, so documentation matters.
What options are available when the balance cannot be paid in one lump sum?
Resolution may include installment agreements or other payment options, depending on the account and the stage of enforcement. In hardship situations, the Offer in Compromise program may be discussed, but eligibility can be limited by filing status and other factors.
What records typically matter most in a sales tax dispute?
Sales reports, sales tax returns, exemption certificates, and payment confirmations usually carry the most weight. Records should clearly tie taxable sales to the specific periods and show how the tax return amounts were calculated.
Closing
Indiana sales tax enforcement can feel disruptive, but the process is usually manageable when notices are handled quickly and records are organized. Understanding the enforcement stage,
meeting deadlines, and communicating clearly with the Indiana Department of Revenue reduces the risk of tax liens, bank levies, wage garnishments, and tax warrant escalation.
Sales tax is held in trust, so resolving unpaid taxes and staying current protects business operations and reduces long-term tax debt. A structured response, accurate documentation, and consistent compliance are often the fastest path to closing the case and restoring stability.
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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