Maryland Sales Tax Nonpayment Risk
Checklist
Introduction
Sales tax nonpayment in Maryland occurs when a business or seller fails to remit collected sales tax to the Comptroller of Maryland by the required due date. This is a serious compliance issue because sales tax belongs to the state, not the business, even though the business collects it from customers. When nonpayment is identified, the Comptroller begins a formal collection process that can include penalties, interest, tax liens, and enforcement action.
Understanding what nonpayment means, how the Comptroller responds, and what steps to take can help prevent escalation and protect your business from severe financial consequences.
What This Issue Means
Sales tax nonpayment means that Maryland sales and use tax collected from customers was not sent to the Comptroller of Maryland by the required due date. The Comptroller's Office tracks all registered sellers and monitors whether sales tax payments arrive as expected. When a payment is missing, late, or incomplete, the Comptroller identifies this as a nonpayment situation and triggers collection and compliance procedures to recover the unpaid tax liability and any associated penalties or interest charges.
Why the Comptroller Issued This or Requires This
The Comptroller requires sales tax remittance because Maryland tax law mandates that sellers collect and hold sales tax on behalf of the state. When payments are not received by the due date, the Comptroller's Office identifies the account as nonperforming. It begins by notifying the business to collect the amount owed, along with applicable penalties and interest. Nonpayment can occur for several reasons, including missed deadlines, incomplete payments, business closure without notification, or administrative errors that may be identified during tax audits.
What Happens If This Is Ignored
If sales tax nonpayment is not addressed, the Comptroller typically escalates collection efforts through additional notices, increased penalties and interest charges, potential tax liens against business assets, wage garnishment, or bank account levies. The longer nonpayment remains unresolved, the larger the total debt becomes due to accruing interest and penalties. In cases of significant or repeated nonpayment, the Comptroller may refer the account to collections or pursue legal action to recover the debt through a court order.
When Professional Help May Be Needed
Complex sales tax nonpayment situations may require specialized assistance to protect your rights and resolve issues efficiently. Tax attorneys can provide audit representation if the
Comptroller initiates a use or sales tax audit to verify your reported tax liability. Professional guidance becomes particularly important when facing enforcement actions such as tax liens, bank account levies, or when considering an Offer in Compromise to settle debt for less than the full amount owed.
Checklist: What to Do After Identifying Sales Tax
Nonpayment
Step 1: Verify the Account Status and Nonpayment Amount
Contact the Comptroller of Maryland at the phone number listed on any notice received. If no notice has been received, call the business tax collections section at 410-649-0633 or email cdcollectionbizz@marylandtaxes.gov to request a full accounting of the nonpayment, including the tax period involved, tax liability amount owed, due date missed, and any penalties or interest applied to your account.
Step 2: Locate and Collect All Tax Records Related to the Nonpayment
Period
Gather all sales records, sales tax returns filed, and payment receipts for the tax period in question. Locate any correspondence from the Comptroller Office, including notices, demand letters, or automated notifications about your use tax or sales tax obligations. Collect bank statements and payment records showing any Maryland sales and use tax payments made during this time and review original registration documents.
Step 3: Determine Why the Payment Was Not Made
Review internal records to identify whether a return was filed, but payment was not submitted, or if the business was operating at the time payment was due. Check whether there was a payroll issue, accounting error, or business interruption that caused the nonpayment of
Maryland taxes. If the business has changed ownership or accounting personnel, contact the previous responsible party to understand what occurred and document the reason in writing for future reference.
Step 4: Calculate the Current Total Obligation
Obtain an itemized statement from the Comptroller's Office showing the principal sales tax owed, penalty amount applied, and interest accrued from the original due date to the current date. Request clarification on whether penalties and interest continue to accrue if the tax liability remains unpaid. Ask whether the Comptroller will consider penalty reduction or abatement
based on reasonable cause, such as circumstances beyond your control that prevented timely payment of Maryland taxes.
Step 5: Determine Whether a Payment Plan Is Needed
If the full amount cannot be paid immediately, contact the Comptroller's Office to ask about installment agreement options for sales tax debt. Request the terms of any available payment plan, including how many months, what the monthly payment amount is, and whether interest continues to accrue during the plan period. Confirm whether a formal agreement must be signed and whether any fees apply to establishing a plan to resolve your outstanding tax liability.
Step 6: Submit Full Payment or Establish a Formal Payment Plan
If paying in full, obtain the mailing address or online payment portal information from the
Comptroller and include a check, money order, or electronic payment that clearly identifies the account number and tax period covered. If establishing a payment plan, request the plan agreement in writing before making the first payment. Submit the first installment payment by the date specified in the plan agreement, and keep copies of all payment receipts and confirmation numbers.
Step 7: Continue Filing and Paying Current Sales Tax Returns on Time
Confirm that the business sales tax registration remains active and the filing deadline remains unchanged for Maryland sales and use tax returns. File all current and future sales tax returns by the due date, even while the nonpayment debt is being resolved. Submit all current sales tax payments in full and on time to avoid additional nonpayment issues and maintain detailed records of all returns filed and payments submitted going forward to demonstrate compliance.
Step 8: Maintain Documentation of All Actions Taken
Save all notices and correspondence from the Comptroller's Office, including copies of all payment receipts, confirmation numbers, and bank account statements showing payments made. Record the dates of all phone calls made to the Comptroller and the names of representatives spoken with, including the substance of each conversation about your tax liability. Store these records in a secure, organized location for at least four years as required by
Maryland tax law.
Step 9: Monitor the Account for Status Updates
Ask the Comptroller's Office whether the account status will be updated in writing once payment is received, and request confirmation that penalties and interest will stop accruing once the account complies. Confirm the timeline for account resolution when all installments are paid if a payment plan is established. Watch for any additional notices from the Comptroller and respond promptly if any are received to prevent further collection actions such as tax liens.
- Ignoring notices from the Comptroller Office: Notices signal that action is required,
- Making partial payments without confirming coverage: Always specify which tax
- Continuing to miss current filing deadlines: Current and past obligations are
- Assuming automatic license suspension: The Comptroller Office must follow a formal
- Failing to document communications: Written records protect the taxpayer if disputes
- Not requesting written payment plan agreements: Verbal agreements are difficult to
- Claiming inability to pay without exploring options: The Comptroller Office may offer
- Neglecting use tax obligations: Businesses must report and pay use tax on
- State tax notice review and response
- Penalty and interest reduction options
- Payroll and trust fund tax assistance
- Payment plan and relief eligibility review
- Representation with state tax agencies
Step 10: Seek Professional Assistance if Needed
If the account is complex, involves multiple tax periods, or tax liens have been filed, consider consulting tax attorneys or a qualified accountant familiar with Maryland sales and use tax issues. If a payment plan is unaffordable or the total tax liability is disputed, ask the Comptroller about the formal protest or dispute process through the Maryland Office of Administrative
Hearings. If facing enforcement action such as tax liens, bank account garnishment, or levy, consult a legal team to protect your rights and assets.
Understanding Tax Audits and the Audit Process
The Maryland Sales Tax Audit Program may review your business records to verify compliance with Maryland sales and use tax obligations. During the audit process, auditors examine sales records, purchase documentation, and evidence of use tax paid on out-of-state purchases used in Maryland. Businesses subject to tax audits should maintain complete records. They may benefit from professional audit representation to ensure the proper application of tax and the accurate calculation of any additional tax liability identified during the examination.
Common Mistakes to Avoid and delays increase penalties and interest charges that compound the original tax liability and may result in tax liens. period or amount the payment covers to ensure proper application to your outstanding
Maryland tax account balance. separate issues, and failing to file current Maryland sales and use tax returns compounds the problem and creates additional penalties. process before suspending a license, so verify the license status directly with the appropriate office to understand your current standing. arise later about what was discussed or agreed upon with Comptroller representatives regarding your tax liability. enforce, so insist on documentation that clearly outlines all terms and conditions for resolving your Maryland tax obligations. installment plans or consider an Offer in Compromise if communicated directly, so contact them before assuming no resolution is possible. out-of-state purchases used in Maryland, and failure to do so increases tax liability during audits.
Received a State Tax Notice?
If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.
20+ years experience • Same-day reviews available
