New York Sales Tax Nonpayment Risk Checklist
Introduction
Sales tax is a tax collected by retailers on purchases and remitted to the state. New York requires eligible businesses to register, collect, and pay this tax on a regular schedule. When sales tax payments are not made on time or at all, the New York Department of Taxation and
Finance considers it a serious compliance failure.
Unpaid sales tax can trigger penalties, interest charges, and enforcement actions.
Understanding what happens when sales tax is not paid helps you respond effectively before the situation worsens.
What This Issue Means
Nonpayment of sales tax means a registered business has failed to submit collected sales tax to
New York by the due date on its sales tax return. This may involve missing one or more payments, filing a return, or not filing a return at all. Nonpayment is distinct from filing late or underpaying; it reflects a complete or partial failure to transfer funds owed to the state.
Why the State Issued This or Requires This
New York law requires all registered sales tax vendors to collect and remit sales tax on taxable sales. The state relies on this revenue for public services and infrastructure. NY DTF follows specific statutory procedures for tax assessments and collection. After an audit or when returns are not filed, the state issues a Statement of Proposed Audit Changes or Notice of Deficiency.
Taxpayers have 90 days to request a conciliation conference using Form CMS-1-MN or file a
Division of Tax Appeals petition using Form TA-100. Only after appeal rights expire does the liability become fixed and final, allowing Civil Enforcement to pursue collection through legally defined procedures.
What Happens If This Is Ignored
NY assesses specific penalties and interest according to the Tax Law. The late filing penalty is
5% per month, up to a maximum of 25%. Late payment penalty is 0.5% per month, up to 25%.
Interest is compounded daily with rates adjusted quarterly. After a liability becomes fixed and final, NY DTF may file a tax warrant with the Secretary of State and the county clerk.
The warrant creates a lien against property. Before serving a bank levy, the state sends Form
DTF-978. Collection tools include income executions requiring up to 10% of gross wages, bank levies, and property seizures. For sales tax, the state may revoke or suspend a Certificate of
Authority for willful failure to comply.
What This Does NOT Mean
Civil sales tax enforcement is entirely separate from criminal prosecution. Under New York Tax
Law, criminal tax fraud requires proof of willful intent to evade taxes. District attorneys or the
Attorney General, not DTF, handle these cases.
Civil collection actions, such as notices, warrants, and levies, do not result in criminal charges.
Receiving a notice or identifying unpaid tax does not mean all collection options have been exhausted or that you cannot resolve the issue. For sales tax, the relevant credential is the
Certificate of Authority, not a general business license.
Checklist: What to Do After Identifying Sales Tax
Nonpayment
Step 1: Gather Your Sales Tax Account Information
Locate your New York sales tax registration number, also called your account number. Find copies of your sales tax returns for the periods in question. Collect payment records, receipts, or bank statements showing any payments made. Gather any notices received from the
Department of Taxation and Finance.
Step 2: Verify the Outstanding Balance and Due Dates
Visit the New York Department of Taxation and Finance website or call the Sales Tax
Information Center at 518-485-2889. Request a current account statement showing all outstanding sales tax periods.
Note the original due date, any extension dates, and the current balance owed. Ask whether the account includes interest, penalties, or other charges in addition to the sales tax. Confirm whether you are currently registered and in good standing with the department.
Step 3: Identify All Outstanding Return Periods
Make a list of each sales tax return period that remains unpaid. Note the return due date and the amount owed for each period. Determine whether some periods have been paid and others have not. Check for any returns that may never have been filed at all.
Step 4: Review Recent Notices or Correspondence
Collect all letters, notices, and documents received from New York tax authorities in the past 12 months. Read each document carefully to understand the requested action or the set deadline.
Note any deadline dates mentioned in the notices, particularly the 90-day appeal deadline for
Notices of Deficiency or Notices of Determination.
Identify whether the notice requests a response, payment, or filing of a return. Check for any mentions of penalties, interest, warrants, or further collection action.
Step 5: Determine If You Have Filed Returns for All Periods
Confirm which return periods have been filed with the state. Identify any periods where a return was due but never submitted. Note the filing frequency required for your account, whether monthly, quarterly, or annually. Determine which periods remain unfiled and which are filed but unpaid.
Step 6: Assess Your Ability to Pay the Full Amount
Calculate the total amount currently owed, including tax, interest, and penalties. Determine whether you can pay this amount in full immediately. If not, identify what portion, if any, can be paid right away. Consider whether payment in installments would be feasible given your business's cash flow.
Step 7: Research Payment Options Available in New York
Visit the New York Department of Taxation and Finance website to review available payment methods. Confirm accepted payment methods, including credit card, ACH, check, money order, or electronic bank transfer. Note any fees associated with each payment method. Determine which method is most practical for your situation.
Step 8: Explore Installment Agreement Options
Contact the New York Department of Taxation and Finance to ask about payment plan availability. NY DTF offers installment payment agreements to taxpayers who cannot pay in full.
Online IPA eligibility requires a balance of $20,000 or less and up to 36 monthly payments; apply via Online Services at ols.tax.ny.gov.
For balances greater than $20,000 or more than 36 payments, call 518-457-5434. Eligibility is evaluated based on tax payment history, return filing history, current financial condition, and adherence to prior agreements.
Ask whether interest and penalties continue to accrue during a payment plan. Inquire about any fees associated with setting up or maintaining a payment plan.
Step 9: Consider Penalty Abatement or Relief Options
Research whether your nonpayment resulted from reasonable cause, such as documented business hardship, error, or circumstance beyond your control. "Reasonable cause" means circumstances beyond your control prevented compliance despite ordinary care and prudence.
Contact the department to inquire about the availability and requirements for penalty abatement.
First-time penalty abatement may also be available. Ask what documentation or explanation is required to support a reasonable cause request. Tax professionals can submit a penalty abatement request online through Tax Professional Online Services.
Step 10: File Any Outstanding Returns Immediately
If returns for certain periods were never filed, prepare and file them right away. Include all sales data, deductions, and other information required on the return. Submit returns using the method specified by the state, whether via an online portal, mail, or in person. Keep a copy of the filed return and any confirmation receipt for your records. Note that filing an unfiled return does not automatically eliminate penalties for late filing.
Step 11: Make a Payment or Submit a Payment Plan Request
If paying in full, select your preferred payment method and submit payment immediately. Include your sales tax number on all payment documents. Keep a record of the payment date, amount, confirmation number, and method.
If requesting a payment plan, submit a formal request with supporting financial information as directed by the department. Contact the department as soon as possible to begin the process.
Step 12: Document All Communication with the Department
Write down the date, time, and name of any department representative you speak with. Note the substance of the conversation, including any commitments or information provided. Obtain a reference or confirmation number for any request or application submitted.
Request written confirmation of any agreement, payment plan, or arrangement discussed. Keep all correspondence and records in a safe, organized location.
Step 13: Monitor Your Account Regularly
Set reminders to verify your account status monthly if a payment plan is in place. Confirm that payments are being credited correctly and on time. Payments may take up to 10 days to post to your account; check your balance online or by phone to confirm posting.
Watch for any new notices or correspondence from the state. Verify that the balance is decreasing as expected. Contact the department immediately if payments are not being applied or if new notices arrive.
- 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 14: Respond to Any Follow-Up Notices Promptly
Open and read all state notices as soon as they arrive. Note any deadlines or action requests.
Respond within the timeframe specified in the notice. Do not ignore notices, even if you believe you have already resolved the issue. Contact the department if you are unsure how to respond or need clarification.
What Happens After This Is Completed
After you submit a payment, file a return, or request a payment plan, the state will process your submission in accordance with its standard procedures. You may receive confirmation of receipt or a new notice reflecting the updated account status. If a payment plan is approved, the department will send you a payment agreement document outlining the schedule and terms.
Interest is charged on unpaid tax from the due date, is compounded daily, and rates are adjusted quarterly. During an installment payment agreement, interest and any penalties continue to accrue on the unpaid balance until the debt is paid in full.
Common Mistakes to Avoid
The state will continue to issue notices if payments are missed or returns are not filed. Ignoring these notices allows debt to grow and enforcement to escalate. If the department requests documentation or financial information, incomplete submissions may delay processing or result in the denial of relief options, such as payment plans. Do not assume a payment plan is approved or a penalty is removed until you receive written confirmation from the department.
Filing returns is separate from paying tax owed; both must be addressed to fully resolve nonpayment. If you have both individual income tax and sales tax obligations, confirm you are addressing the correct account. Written proof of payments, agreements, and conversations is essential if disputes arise later.
Frequently Asked Questions
How long does the Department of Taxation and Finance take to process a payment?
Payments may take up to 10 days to post to your account. Check your balance online or by phone to confirm posting. Electronic payments generally post faster than mailed checks.
If I set up a payment plan, will interest and penalties stop accruing?
Interest is charged on unpaid tax from the due date, is compounded daily, and rates are adjusted quarterly. During an installment payment agreement, interest and any penalties continue to accrue on the unpaid balance until the debt is paid in full. Penalties themselves do not increase once assessed, but they remain part of the balance owed unless specifically abated for reasonable cause.
Can I request that penalties be removed from my account?
Penalty relief may be available for reasonable cause. Reasonable cause is based on all facts and circumstances showing that you used ordinary business care and prudence to meet your tax obligations, but were unable to do so due to circumstances beyond your control. First-time penalty abatement may also be available. Documentation supporting reasonable cause should be submitted with your request.
What happens if I cannot afford to pay the full amount, and a payment plan is denied?
If a payment plan request is denied or an IPA is terminated, you continue to owe the full balance. NY provides detailed appeal procedures for tax assessments. You have the right to request a conciliation conference using Form CMS-1-MN or file a Division of Tax Appeals petition using Form TA-100, generally within 90 days of a Notice of Deficiency or Notice of
Determination.
Is there a statute of limitations on sales tax debt in New York?
New York State Tax Law generally places a three-year statute of limitations on the right to assert additional tax due, generally three years after your return was filed. For sales tax collection, NY has a 20-year statute of limitations from the first date a warrant could be filed. Tax liabilities are extinguished after 20 years from the first date a warrant could be filed.
What is the difference between filing late and nonpayment?
Filing late means the return was submitted after the due date but was eventually filed.
Nonpayment means the tax shown on the return or due on an unfiled return was not paid to the state. Both can result in penalties, but they are separate issues that must be addressed separately.
Will nonpayment affect my personal credit score?
As of April 2018, major credit bureaus no longer include tax liens on consumer credit reports.
Tax warrants remain public records filed with the Secretary of State and county clerks, but do
not appear on credit reports or directly affect credit scores through credit reporting. The public record nature of warrants could be discovered during credit reviews or due diligence.
Can the state place a lien on my business or personal property for unpaid sales tax?
After a tax liability becomes fixed and final, NY DTF may file a tax warrant with the NY Secretary of State and the county clerk. The filed warrant is equivalent to a civil judgment and creates a lien against real and personal property. You must pay your total warranted balance in full to satisfy the warrant.
How do I set up a payment plan if I cannot reach the department by phone?
You may request a payment plan through the New York Department of Taxation and Finance website at ols.tax.ny.gov or by mail. Visit the official state website for current options and submission instructions.
What happens if I miss a payment on a payment plan?
NY may terminate an installment payment agreement if you fail to pay an installment or any other tax liability when due. The state will give you at least 30 days' prior notice explaining the reason before terminating or modifying an IPA, unless collection is in jeopardy. After termination, the state may resume collection action on the liability. If you miss a payment, contact the department immediately.
Closing
Sales tax nonpayment requires prompt action. Understanding what nonpayment means, what triggers state action, and what steps are available to address it puts you in a position to respond effectively. Gather your account information, communicate with the Department of Taxation and
Finance, and either pay or arrange a plan. Taking action now prevents the debt from growing and reduces the risk of more severe enforcement action later.
Facing State Tax 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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