Indiana Sales Tax Penalties & Interest Checklist
Introduction
Sales tax penalties and interest are charged by the Indiana Department of Revenue when
Indiana sales tax is paid late, a required tax return is filed late, or collected sales tax is not remitted on time. These additional amounts can quickly increase tax liabilities, especially when unpaid taxes remain open across multiple filing periods.
This guide explains what triggers failure to file and late payment exposure, how penalties and interest generally work, and what steps typically reduce the risk of escalation. It also outlines practical ways to use the INTIME portal to confirm balances, correct issues, and support ongoing tax compliance.
What This Issue Means
Sales tax penalties are assessed when a business fails to comply with Indiana sales tax filing and payment requirements, including failure-to-file and failure-to-pay penalties. Interest is charged on unpaid taxes from the due date until the balance is paid in full, which means time increases the total amount owed even when the original sales tax rate stayed the same.
Penalties and interest are applied to the account and become part of the collectible balance, which may later support stronger collection tools. In many cases, sales and use tax exposure also appears when use tax was missed on taxable purchases, which can increase the assessment even when sales tax returns were filed.
Why the State Issued This or Requires This
Indiana uses penalties to encourage timely tax payments and to discourage repeated noncompliance, including patterns of late payment and repeated failure to file. Interest is intended to compensate the state for delayed payment of state taxes and is generally applied using published rates tied to the relevant period.
The Indiana Department of Revenue typically assesses these charges through automated processing when a tax return is late, a payment is short, or a balance remains unpaid after an assessment. The issue may also appear after an audit, an estimated billing, or a review of
Economic Nexus and remote seller nexus activity involving marketplace nexus reporting.
What Happens If This Is Ignored
If penalties and interest notices are ignored, the account often moves deeper into tax collections, starting with additional notices and progressing to a demand notice and a tax warrant that can function like a tax lien. As enforcement increases, collection fees may apply, and the state may pursue levies or other collection steps, while interest continues to accrue and flexibility usually decreases.
What This Does Not Mean
A penalty and interest notice does not automatically mean criminal penalties, and most cases remain in the civil penalties track when the issue is addressed promptly. It also does not mean assets have already been seized or that options are gone, since payment plan, dispute, or penalty abatement requests may still be available within deadlines.
Checklist: What to Do After Receiving This or Identifying
This Issue
Step 1: Locate the notice and confirm the tax period
Review the notice to confirm the tax period, account type, and whether it involves sales tax, Use
Tax, or both. Record the due date and response deadline to limit failure to file or late payment escalation.
Step 2: Verify the balance in the INTIME portal
Use the INTIME portal to confirm the current balance, penalties, and interest, and to check for recent assessment updates. If access errors appear, document the issue and save any
Cloudflare Ray ID shown.
Step 3: Confirm filing status for each period
Check sales tax returns period by period to confirm what was filed and what remains unfiled.
The filing required zero returns, since missing filings can keep the account in enforcement status.
Step 4: Reconcile taxable sales and Use Tax exposure
Compare sales records to reported taxable sales to confirm the correct base for Indiana sales tax. Review purchases for Use Tax exposure when vendors did not charge sales tax on taxable items.
Step 5: Validate exemption support and Form ST-105 records
Review exemption certificates for completeness when Indiana Sales Tax Exemptions were claimed. Confirm Form ST-105 and related records match each exempt sale and are ready if the
Department requests support.
Step 6: Request a precise calculation of penalties and interest
Ask the Indiana Department of Revenue for an itemized breakdown showing the penalty type, rate, and interest date range. Use this to confirm that posted failure-to-pay penalties, failure-to-file penalties, or other additions match the account history.
Step 7: Decide whether to pay, dispute, or request relief
If the balance is accurate and payment is possible, pay quickly to reduce interest and collection pressure. If the amount is disputed, prepare records and follow the protest process outlined in the notice, including the deadline specified therein.
Step 8: Explore payment options when full payment is not possible
Request payment plan options through INTIME or by contacting the Indiana Department of
Revenue. Confirm terms in writing, since interest may continue, and missed payments can reopen collections.
Step 9: Submit a penalty abatement request when reasonable cause exists
If reasonable cause applies, submit a penalty abatement request with a clear explanation and supporting records. Focus on what caused the failure to file or Failure to pay, and what changed to prevent recurrence.
- 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: Confirm posting and monitor for follow-up notices
Monitor the account to confirm payments posted to the correct period and tax type. Respond to follow-up notices quickly to reduce the risk of a tax warrant or tax lien filing.
What Happens After This Is Completed
After filings are corrected and payments are posted, the Indiana Department of Revenue updates the account balance in INTIME and may issue a revised notice confirming the remaining amount due. If a dispute or protest is filed, the Department reviews the submission and may issue a letter of findings, and further appeal options may exist through the Tax Court if deadlines are met.
Common Mistakes to Avoid
Missing response deadlines often leads to escalation from assessment notices to a demand notice or tax warrant activity, so dates should be tracked and acted on quickly. Paying without
filing missing returns, assuming penalties are removed automatically, or failing to confirm posting can keep the account in enforcement and increase penalties, interest, and collection fees.
Frequently Asked Questions
How are Indiana sales tax penalties typically assessed?
Penalties are generally assessed when sales tax returns are filed late, when payments are late, or when collected sales tax is not remitted by the due date. The posted charges may reflect failure to file or pay penalties, or other additions tied to the account’s status.
Does interest stop when a payment plan is approved?
Interest usually continues to accrue on unpaid taxes until the balance is paid in full, even when a payment plan is in place. A plan may reduce enforcement pressure, but it does not automatically eliminate interest.
Can penalties be removed through reasonable cause relief?
Penalty abatement may be available when the taxpayer shows reasonable cause and shows the issue was not willful neglect. Relief typically requires a written request with supporting documentation, and approval depends on the facts.
What if the notice amount looks wrong?
The account should be reviewed in INTIME and reconciled against sales records, prior payments, and filed tax return confirmations. If discrepancies remain, the Indiana Department of
Revenue should be contacted and provided documentation supporting the requested adjustment.
When do enforcement tools like a tax warrant or tax lien become a risk?
Risk increases when notices are ignored, balances remain unpaid, or a demand notice deadline passes without resolution. Once a tax warrant is filed, the balance may support broader collections activity and become harder to resolve quickly.
Closing
Sales tax penalties and interest are usually manageable when the correct tax period is identified early, and the account is reconciled with complete records. Consistent use of the INTIME portal, accurate sales and use reporting, and documented exemption certificates help reduce unpaid taxes and support long-term tax compliance.
When Economic Nexus, remote seller nexus, or marketplace nexus activity changes due to growth, periodic reviews help prevent repeat late payment issues and new balances. Clear responsibility, reliable recordkeeping, and timely filings give businesses the best path to staying current with Indiana sales tax obligations.
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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