Michigan Sales Tax Nonpayment Risk Checklist
Introduction
Sales tax nonpayment in Michigan occurs when a business fails to remit collected sales taxes to the Michigan Department of Treasury within the required timeframes. This issue matters because sales tax is a trust fund where your business collects it from customers on behalf of the state. When payment is missed or delayed, the state treats it as a serious tax compliance issue and escalates collection efforts accordingly. Understanding what happens at each stage helps you respond appropriately before enforcement actions take effect.
What This Issue Means
Sales tax nonpayment means that collected sales taxes were not sent to the Michigan
Department of Treasury by the required payment deadline. This can happen when a sales tax return was filed, but payment was not made, or when both the failure to file and failure to pay occurred simultaneously. The state treats this as an unpaid tax liability owed by your business.
Why the State Requires This
The Michigan Department of Treasury requires timely sales tax payment because sales tax is not your business’s money. Businesses act as collection agents for the state. When payments are not made on time, the state cannot fund public services or maintain accurate tax records.
The state’s collection system quickly identifies nonpayment through automated systems in
Michigan Treasury Online.
What Happens If This Is Ignored
If sales tax nonpayment is ignored, the state will escalate collection efforts through several stages. The state sends notices requesting payment through a documented sequence, including a Notice of Inquiry, Notice of Intent to Assess, and Bill for Taxes Due. If those go unpaid, the
Department of the Treasury may place your account into active collection, which can include wage garnishment, bank levies, or tax lien filings against business assets.
Understanding Penalties and Interest
- Penalty Charges: A late penalty of 5 percent of the total unpaid tax due for the first two
months applies. After two months, an additional 5 percent monthly penalty is assessed.
The penalty rate is capped at 25 percent of the total unpaid tax due.
- Interest Accumulation: Interest continues to accrue on unpaid state taxes based on the
prime rate plus 1 percent, adjusted semi-annually. You can use the interest calculator on
Michigan Treasury Online to estimate amounts owed. Interest accumulates on any remaining tax balance even during approved payment plans.
Checklist: What to Do After Identifying Sales Tax
Nonpayment
Step 1: Locate Your Sales Tax Account Information
Find your Michigan sales tax identification number on past sales tax returns or correspondence from the state. Write down the business name and address registered with the Department of
Treasury. Gather all sales tax return documentation you have on file, including filed returns and payment records.
Step 2: Contact the Michigan Department of Treasury
Call the Department of Treasury at 517-636-6925 for sales tax matters or 517-827-3227 for collections on delinquent business accounts. Provide your sales tax identification number and the name on the account. Request a current account balance statement showing all unpaid amounts with written documentation of the tax owed.
Step 3: Verify the Amount Owed
Request an itemized statement showing original tax amount due for each period, tax penalties and interest applied, and total balance currently owed. Compare the state’s statement to your own records to confirm accuracy. Note any discrepancies for later discussion with the
Department of the Treasury.
Step 4: Review All Notices Received
Locate all notices, bills, or collection letters from the Department of Treasury or Coast
Professional Inc. Read the notices carefully to identify the deadline to respond, the total amount claimed due, the specific account or periods involved, and any required action or next steps.
Step 5: Understand Your Appeal Rights
You have 60 days from the Notice of Intent to Assess to request an informal conference with the
Hearings Division using Form 5713. You have 35 days from a Final Assessment to appeal to the
Michigan Tax Tribunal or 90 days to appeal to the Court of Claims. Submit requests by mail or fax to the Hearings Division.
Step 6: Address Calculation Disputes
If you believe the amount owed is incorrect, contact the Department of the Treasury to explain your position with supporting documentation. Provide cancelled checks showing payments made, bank statements showing transfer dates, prior correspondence showing payment confirmations, or corrected return filings if errors occurred.
Step 7: Consider Reasonable Cause for Penalty Waiver
If you have reasonable cause for late payment, such as a natural disaster, serious illness, or circumstances beyond your control, you may request penalty abatement. Prepare documentation supporting your reasonable cause claim. Submit waiver requests in writing to the
Department of the Treasury with a detailed explanation and supporting evidence.
Step 8: Arrange Payment or Payment Plan
If you can pay taxes in full, ask the Department of Treasury for current payment instructions through Michigan Treasury Online and confirm the exact amount due. If entering a payment plan, complete Form 990 for plans lasting 24 months or less, including a proposed payment amount, for Treasury review. Keep written confirmation of any approved payment arrangement.
- Missing Payment Plan Deadlines: Making a single late payment under an agreed plan
- Ignoring Collection Agency Notices: The Department of the Treasury refers unpaid
- Assuming Debt Is Resolved Without Confirmation: Always obtain written
- Calling the Wrong Phone Number: Calling 517-636-4486 reaches Individual Income
- Confusing Tax Compliance with Tax Fraud: Nonpayment due to cash flow issues is
- Risking Your Liquor License: If your business holds a liquor license and is past due in
- 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 9: Resume Timely Sales Tax Filings
Ensure all current sales tax returns are filed on time, and that going forward, accurate payments are submitted by the 20th day of the month following the reporting period. Verify your filing frequency matches your sales tax permit requirements. Set up calendar reminders for upcoming sales tax filing deadlines and consider automating payments.
What Happens After This Is Completed
Once you contact the Department of the Treasury and address the nonpayment, the state acknowledges your account status and outlines the next steps. If a payment plan is approved, the Department of the Treasury sends written confirmation outlining monthly payment amounts and due dates. If payment is made in full, the state processes the payment and updates your account balance within 30 days.
Common Mistakes to Avoid can trigger cancellation and restart collection actions. Always make payments on or before the due date specified in your written payment plan agreement. accounts to Coast Professional Inc. for collection assistance. Notices from this agency still require response and should be treated with the same urgency as direct Treasury correspondence. confirmation that a payment plan has been approved or that full payment has been received and credited. Verbal agreements or assumptions without documentation can lead to continued collection enforcement actions.
Tax services, not sales tax or business collections. Use 517-636-6925 for sales tax questions or 517-827-3227 for collections matters to reach the correct department. different from intentional tax evasion or tax fraud. The state may pursue criminal penalties through the Attorney General’s Office for deliberate criminal acts involving sales tax collection fraud, but most nonpayment cases involve only civil penalties. filing or paying business taxes, the Department of Treasury can request that the
Michigan Liquor Control Commission revoke or not renew your liquor license.
When to Seek Professional Help
Consider consulting sales tax attorneys if you face complex sales tax liability issues, disputes over economic nexus, or situations involving potential fraud penalty assessments. Tax and accounting professionals can assist with filing frequency corrections, zero-filing return situations, or navigating sales tax audit procedures. Professional assistance may be particularly valuable when dealing with significant tax balance due amounts or when exercising Taxpayer Rights
During an Audit.
Closing Section
Sales tax nonpayment is a serious state compliance issue, but it is not automatically irreversible.
Understanding what the state requires, staying in contact with the Michigan Department of
Treasury, and taking action before enforcement escalates are the foundations of resolving this issue.
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