North Carolina Sales Tax Nonpayment Risk Checklist
Introduction
Sales tax is a consumption tax that businesses collect from customers and remit to the state of
North Carolina. When a company collects sales and use tax but does not pay it to the state, this creates tax liabilities that trigger state enforcement action. The North Carolina Department of
Revenue treats unpaid sales tax compliance issues seriously because the money belongs to the state, not the business. Ignoring nonpayment notices can result in tax liens, garnishment, or closure actions.
What This Issue Means
Sales tax nonpayment occurs when a business collects sales and use taxes from customers but fails to remit the full amount owed to North Carolina by the due date. This means the state tax authority has identified a shortfall between what was reported and what was paid, or payments were not made at all on scheduled filing dates. Monthly filers must submit their sales tax return by the 20th of the following month, while quarterly filers must pay by the last day of January,
April, July, and October.
Why the State Issued This Notice
North Carolina law requires businesses to collect and remit sales and use tax on retail sales within filing frequency deadlines assigned by the Secretary of Revenue under the North
Carolina Sales and Use Tax Act. When the Department of Revenue identifies nonpayment through filing records, system audits, or account reviews, it issues notices to inform the business of the tax period liability. The state’s role is to enforce tax compliance and collect taxes owed to maintain state revenue for public services and programs.
What Happens If This Is Ignored
Unpaid sales and use taxes trigger escalation steps, including notices of collection, demand for immediate payment, and enforcement actions such as tax liens on business or personal property. The state may pursue collection methods including bank garnishment, wage garnishment, or business closure. Interest charges and tax penalties continue to accrue on the unpaid balance during this period. If tax, penalty, and interest are not paid within 60 days after a
Notice of Collection is mailed, a 20% Collection Assistance Fee will be assessed.
What This Does Not Mean
Sales tax nonpayment does not automatically mean the business is shut down, though closure is a possible enforcement step. It does not mean criminal charges for sales tax evasion have been filed, though criminal action is a separate possibility in cases of intentional tax evasion. It does not mean all business accounts or bank accounts are frozen immediately, though the state may pursue account levies as part of collection proceedings.
Step-by-Step Checklist: What to Do After Receiving a
Sales Tax Nonpayment Notice
Step 1: Locate and Review All Documentation
Find the original notice or letter from the North Carolina Department of Revenue and identify the tax period liability involved, the amount claimed as unpaid, and any case or account numbers listed. Check the mailing date and note any deadline stated in the notice, as different notice types have different response requirements, including Failure to File Penalties and Failure to
Pay Penalties.
Step 2: Verify the Debt and Compare Records
Review your own records of sales and use taxes collected during the period in question and compare the amount the state claims is owed to your filed sales tax return. Check your business bank or accounting records, including point-of-sale data and journal entries, for proof of payment and note any discrepancies between what you reported and what the state claims as outstanding.
Step 3: Contact the Department of Revenue
Call the North Carolina Department of Revenue at 877-252-3052 for general inquiries or
877-252-3252 for collections matters to discuss the notice with local tax authorities. Provide your business name, account number, and tax identification number when you call. Ask for clarification on how the amount owed was calculated and inquire about current interest charges and tax penalties being assessed.
Step 4: Gather Proof of Payment If Applicable
Locate cancelled checks or bank statements showing payment to the Department of Revenue, and find wire transfer confirmations or online portal transaction confirmations for Form E-500 submissions if payments were made electronically. Note the exact payment dates and amounts from your records and organize all proof of payment documents in chronological order for submission to the tax authority.
Step 5: Request Account Adjustment or Payment Posting
Contact the Department of Revenue and ask whether claimed payments have been posted to your account, and provide proof of payment for any amounts you believe were sent but not
credited. Request a written response outlining what has been received and what remains unpaid as Sales Tax Payable. Ask whether the department can manually post payments that may have been misdirected or delayed.
Step 6: Determine Your Ability to Pay
Calculate whether you can pay the entire amount of tax liabilities owed immediately or determine what amount you could pay within a short timeframe. If full payment is not possible, assess whether you need a payment arrangement or installment plan to resolve the debt.
Document your business's financial situation if payment will be difficult, as this information may be required for plan requests or audit reconsideration.
Step 7: Respond to the Notice Immediately
Do not delay your response, as enforcement actions may begin if you do not respond immediately according to the Notice of Collection guidance from state tax authorities. Prepare a written response if you dispute the amount owed or believe errors exist, including specific information about the tax period liability in question and your calculation of tax owed. Mail your response to the address listed on the notice via certified mail and keep copies of everything you send.
Step 8: Request a Payment Plan or Installment Agreement If Needed
Complete Form RO-1033 Installment Agreement Request electronically through the NCDOR website if you cannot pay the full amount of tax liabilities immediately. Standard installment agreements are limited to 18 monthly installments or fewer. Still, exceptions may be available if you can show financial inability to meet the standard terms or if liability is due to sales tax audits covering multi-period assessments. You must have received a Notice of Collection before an installment agreement can be established, and payments must be made by bank draft unless you do not have a bank account.
Step 9: Request Penalty Waiver If Eligible
Review the NCDOR Penalty Waiver Policy to determine if you qualify for penalty relief under one of three categories: Good Compliance Waiver, Automatic Waiver, or Special Circumstances
Waiver. To be eligible for a Good Compliance Waiver, you must meet all five conditions, including no missing tax returns, no taxes due other than waivable penalty, not the same mistake as before during the lookback period, provide all requested documentation, and no prior good compliance waiver in the past three years. Submit Form NC-5500 Request to Waive
Penalties if you believe you qualify for penalty relief based on these criteria to reduce tax penalties assessed.
- Ignoring the notice entirely: Not responding allows the department to proceed with
- Assuming a payment was received without confirming: Payments that are mailed
- Not keeping copies of your correspondence: Documentation of what you sent, when
- Missing payment plan deadlines: If you enter a payment plan agreement, missing
- Failing to report and remit future sales tax: Continuing to fail to file or remit current
- Not maintaining proper documentation: Businesses should maintain exemption
- 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: Monitor for Further Collection Action
Watch for follow-up correspondence from the Department of Revenue and note any mention of
North Carolina tax liens, levies, or property seizure in subsequent notices. Track whether
collection actions have been filed against your business or personal assets and document any garnishment notices received. Respond immediately to any additional notices or demands to prevent escalation of enforcement actions against your property or accounts by state and local tax authorities.
When to Consult Professional Help
Consider consulting sales tax attorneys in NC or State Tax Lawyers in North Carolina if your tax liabilities exceed your ability to pay or if you face complex assessment issues. Tax attorneys can assist with audit defense, negotiating Voluntary Disclosure Agreements, or challenging sales tax audits through audit reconsideration procedures. Professional firms such as Hartsoe &
Associates, Brian D Westrom Attorney at Law, Dysart Willis, and Maynard Nexsen specialize in resolving tax problems. They can guide tax planning strategies to prevent future sales tax compliance issues.
Common Mistakes to Avoid enforcement actions, including tax liens, garnishment, and business closure, without further communication from the taxpayer. may be delayed, lost, or misdirected, so always verify that payments have been posted to your account through direct contact with local tax authorities. you sent it, and what the tax authority told you is critical if disputes arise later or if enforcement actions are pursued. payments can result in the plan being canceled and enforcement action resuming immediately without additional notice to the taxpayer. sales and use tax obligations while resolving past debt worsens the situation and may trigger additional enforcement actions from the department. certificates, resale certificates, and sales tax permits to support tax-exempt transactions and avoid disputes during sales tax audits by tax authorities.
Understanding Your Tax Obligations
Businesses operating in North Carolina must understand their sales tax nexus obligations, including Physical Nexus and Economic Nexus requirements under state laws. Your company
may have nexus through physical presence, retail sales locations, or economic activity thresholds that trigger sales tax compliance requirements.
Proper exemption certificate management and the maintenance of valid resale certificates help ensure compliance during routine reviews or sales tax audits. Using reliable tax software and consulting with a sales tax attorney can help businesses navigate complex sales and use tax issues and avoid future tax period liability problems.
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