North Carolina Sales Tax Payment Plan and
Resolution Checklist
Introduction
Sales tax is a tax on goods and some services that North Carolina businesses must collect from customers and remit to the state. If you operate a business or manage its finances, understanding how to file and pay sales tax on time is essential. Failing to pay sales tax when due can result in penalties, interest charges, and collection action by the North Carolina
Department of Revenue.
What This Issue Means
Businesses collect sales tax at the point of sale and must remit it to North Carolina by the due date. When a company fails to pay its sales tax to North Carolina by the due date, it incurssales tax debt. This unpaid liability may trigger an official Notice from the Department of Revenue requesting payment, setting up a payment arrangement, or notifying you of penalties and interest being added to the original amount owed.
Why the State Issued This or Requires This
North Carolina requires businesses to collect Sales & Use tax on most taxable transactions and remit these funds according to a filing schedule: the NC DOR issues notices and payment demands to collect revenue for state operations. When payment is not received by the deadline, the Department of Revenue initiates collection activity to recover the debt.
What Happens If This Is Ignored
If an outstanding sales tax balance is not addressed, the state will escalate collection action.
This may include additional collection letters, the addition of penalties and interest to the original balance, and potentially enforcement actions such as tax warrants, bank levies, Wage garnishments, or other collection procedures. Ignoring notices does not resolve the liability and makes the situation more costly and complex.
Step-by-Step Checklist: What to Do After Receiving a
Sales Tax Notice
Step 1: Verify the Notice and Understand What Is Owed
Confirm the notice came from the official North Carolina Department of Revenue. Check for your business name, tax identification number, past-due tax periods in question, amount owed, original due date, and any penalties or interest included.
Step 2: Check Your Filing and Payment Records
Search your business records for confirmation that the return was filed. Look for payment confirmations or bank statements showing whether a payment was sent. Verify your Sales &
Use Certificate of Registration status and check with your accountant or bookkeeper if applicable.
Step 3: Determine Whether You Can Pay the Full Amount
Calculate the total amount due, including any penalties or interest listed in the notice. Assess whether your business can pay this amount in full by the deadline stated in the notice. Consider your financial circumstances and available payment options before deciding on your next steps.
Step 4: Wait for Notice of Collection Before Requesting a Payment Plan
You cannot set up an NCDOR Installment Agreement until you receive a Notice of Collection from NC DOR. If you submit a payment plan request before receiving this notice, your request will not be processed. Use Form D-400V for voluntary monthly payments before receiving a
Notice of Collection.
Step 5: Apply for a Payment Plan After Receiving Notice of Collection
Once you receive a Notice of Collection or final bill, complete Form RO-1033 Installment
Agreement Request electronically through the NCDOR website. You must meet specific requirements, including having filed all required returns and allowing automatic payments through electronic debits unless you have no bank account.
Step 6: Understand Penalties and Interest Rates
Two separate penalties may apply to late sales tax. The failure-to-file penalty is 5% of the net tax due per month, or fraction thereof, with a maximum of 25%. For taxes assessed on or after
January 1, 2023, the failure to pay penalty is five percent of the tax not paid by the original due date.
Step 7: Review Your Payment Plan Agreement Carefully
Once approved, the Department of Revenue will send you a formal monthly payment plan agreement. Read this agreement carefully and verify the total amount owed, the payment amount, the payment frequency, each payment due date, and the payment method specified in your installment plans.
Step 8: Make Payments According to the Agreed Schedule
Set up a system to ensure you do not miss any scheduled payment dates. Make each payment in the amount and by the method specified in your agreement. Keep proof of each payment, including bank statements and payment receipts.
Step 9: Continue Filing Current Sales Tax Returns on Time
While making payments on your past-due balance, continue to file sales tax returns and pay current taxes by the regular deadline. Failure to maintain current compliance with your tax obligations may result in additional collection action or cancellation of your payment plan.
- Missing payment deadlines: Late or missed payments may result in default on the
- Requesting a payment plan prematurely: You must wait until you receive a Notice of
- Not filing current returns: Continuing to owe back sales tax while failing to file and pay
- Sending payments to the wrong address: Mailing payments to an incorrect address
- Not updating contact information: If your address or phone number changes, update
- 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 Your Account and Keep All Records
Save all notices, letters, and agreements from the Department of Revenue. Keep detailed records of every payment made, including dates and amounts. Request written confirmation if the department advises that a payment has been received or that the account status has changed.
When to Consider Professional Tax Help
If your tax debt is substantial or you are facing aggressive collection activity, consulting a tax professional may be beneficial. Tax attorneys or tax accountants can assist with evaluating your payment options, negotiating installment plans, or exploring tax relief programs. North Carolina tax relief specialists can also help if you disagree with a Proposed Assessment or need to file a
Request for Review.
Alternative Tax Resolution Options
Offer in Compromise
If you cannot afford monthly payments under a standard installment agreement, you may qualify for an Offer in Compromise. This option allows qualifying taxpayers to settle tax debt for less than the full amount owed based on their financial circumstances. Specific OIC Forms must be completed through NC DOR.
Penalty Relief
The Department of Revenue may grant penalty relief in certain circumstances, such as a natural disaster or reasonable cause. Submit Form NC-5502 to request a waiver of penalties. Interest continues to accrue on unpaid tax liability and cannot typically be waived except in specific statutory situations.
Common Mistakes to Avoid payment plan and escalation to enforcement action. Always make payments at least fifteen days before the due date to allow time for processing.
Collection before applying for an installment agreement. NCDOR will not process requests submitted before receiving this notice. current sales tax returns can trigger additional collection action. Payment plan agreements require current compliance to remain valid. may delay crediting and create confusion about whether the payment was received.
Always use the address specified in your payment agreement. it with the Department of Revenue, so you receive all notices. Missing critical notices can result in default.
Frequently Asked Questions
Can I Set Up a Payment Plan If I Owe Sales Tax?
NCDOR will consider installment plans if all statutory requirements are met. You must receive a
Notice of Collection or final determination, file all required returns, have no prior default on the same periods, and agree to automatic payments unless you have no bank account.
Will Interest Stop While I Am Paying a Plan?
Interest always continues to accrue on any unpaid tax liability during an installment payment agreement. This is a statutory requirement under North Carolina General Statute 105-241.1.
The current interest rate is seven percent as of January 1, 2026.
What Happens If I Miss a Payment?
Missing a payment on an agreed payment plan may result in default on the plan. The department may escalate to collection action or demand full payment of the remaining balance.
Contact the department immediately if you are unable to make a scheduled payment.
When Should I Consult Tax Resolution Services?
Consider consulting tax resolution services or a tax professional if you face complex tax debt, disagree with assessments, or need help navigating debt resolution options. Professional tax help may include assistance with Offer in Compromise applications, settlement discussions, or representation during sales and use tax audit proceedings.
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.
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