Texas Sales Tax Enforcement Actions Checklist

Texas Sales Tax Enforcement Actions Checklist

Introduction

Sales tax is a tax that Texas businesses collect from customers when they sell taxable goods or services. This tax is then sent to the state.

If the Texas Comptroller of Public Accounts determines that a business has not collected, reported, or paid sales tax correctly, it may issue a Texas sales tax enforcement notice. These actions can include audit notices, assessments, or collection letters.

What This Issue Means

A Texas Comptroller audit assessment is a formal notice from the Texas Comptroller indicating that the state believes a tax liability exists that has not been correctly addressed. This could mean unreported sales, incorrect tax calculations, late payments, or missing tax returns.

Why the State Issued This or Requires This

The Texas Comptroller of Public Accounts enforces sales and use tax compliance to ensure that all businesses comply with state tax law. Common triggers include a filed return showing unpaid taxes, a missing return for a period when the company was required to file, a discrepancy found during an audit, or a report from a third party.

What Happens If This Is Ignored

Failing to respond to a sales tax enforcement action often results in escalating penalties, additional interest, and aggressive collection measures. State tax authorities can place a lien on business property, freeze or seize eligible assets, or transfer the account to a collection agency for recovery.

Under state law, the Comptroller may also suspend or revoke a sales tax permit following a formal hearing. As enforcement delays continue, the balance owed typically grows, making the situation harder to resolve.

What This Does NOT Mean

A sales tax enforcement action does not automatically mean criminal charges will be filed or that the business will be shut down. It does not mean the state has made a final determination of guilt or wrongdoing.

Checklist: Texas Sales Tax Enforcement Actions

Step One: Locate and Review the Notice

1. Find the original notice or letter from the Texas Comptroller of Public Accounts.

2. Read the entire document, including all pages and attachments.

3. Note the notice date, account number, assessment amount, and any listed periods.

4. Identify the deadline for the response. For a Notice of Tax Due following an audit, taxpayers typically have 60 days from the date of the notice to request a redetermination hearing.

5. Check whether the notice requests information, payment, or both.

6. Keep the original notice and any supporting documents in a safe location.

Step Two: Identify the Type of Enforcement Action

Determine whether the notice is an audit letter, assessment notice, demand for payment, or another type of enforcement action. Review the notice header or title to confirm what action the state is taking.

Step Three: Gather Required Documentation

1. Collect all sales tax returns filed for the periods listed in the notice.

2. Gather bank statements, sales records, and receipts for those same periods.

3. Locate any prior correspondence with the Texas Comptroller about this account.

4. Find records of any sales tax payments made during the periods in question.

5. Keep copies of business licenses, permits, and registration documents.

6. Organize all documents by date and period for easy reference.

Step Four: Verify Account Information

Check that the account number on the notice matches the business's registered account.

Confirm that the business name and address are correct.

Step Five: Review the Assessment or Claim

Read the detailed explanation of what the state believes is owed. Note the calculation method used, which may include estimated tax, audited adjustment, or other methods. Penalties are automatically assessed according to the Texas Tax Code: a 5 percent penalty applies if tax is paid 1-30 days late, a 10 percent penalty applies if tax is paid over 30 days late, and a $50 late filing penalty is assessed on each report filed after the due date, regardless of whether tax is owed.

Step Six: Prepare a Response

Decide whether to pay the amount in full, request more information, or dispute the assessment.

Gather any documentation that supports the business's position. Write a clear, factual explanation of the business's response if disputing the notice. Make copies of all materials before sending.

Step Seven: Submit the Response Before the Deadline

The determination becomes final 60 days after the statement date if no hearing is requested.

The business should also determine the preferred method of submission, which may include mail, an online portal, or in-person delivery.

Step Eight: Maintain Communication Records

Document the date the notice was received. Record the date any response was submitted.

Keep copies of all correspondence with the Comptroller's office. Note any phone calls or meetings, including dates, names, and topics discussed.

Step Nine: Wait for State Response

Allow time for the state to receive and process the response. Do not assume that no reply means the matter is closed.

Step Ten: Request Assistance if Needed

If uncertain how to respond, gather the notice and all supporting documents. Consider consulting with a certified public accountant, bookkeeper, or tax professional.

What Happens After This Is Completed

Once a response is submitted, the Texas Comptroller typically reviews the information and either issues a final determination or requests additional documentation. If the business pays the assessed amount, the account will be marked as paid, and the matter will close.

Common Mistakes to Avoid

• Missing the response deadline can result in the determination becoming final if a hearing

is not requested within the required timeframe. Once the deadline passes, the state may proceed with collection action without issuing further notice.

• Providing incomplete information can delay resolution and trigger further enforcement.

When the state requests specific documents or explanations, submitting only partial responses may result in additional notices or revised assessments.

• Assuming an enforcement notice will resolve itself often leads to increased penalties and

interest. Even when an assessment is disputed, a written response is required to preserve appeal rights and prevent further action.

• Combining personal and business finances can complicate sales tax reporting and

audits. If sales records are unclear or incomplete, the state may estimate the tax owed, making separate bank accounts and detailed documentation essential.

• Failing to keep copies of correspondence creates unnecessary risk. Retaining copies of

all documents sent to and received from the state helps protect against lost mail or misplaced records.

• Failing to document communications can lead to misunderstandings or disputes and

weaken the business’s position during an enforcement review. Any phone conversation with the Comptroller’s office should be followed by written confirmation, with email providing a more reliable record than verbal exchanges.

Frequently Asked Questions

What is the difference between an assessment and an audit notice?

An audit notice typically begins an investigation into whether the business owes sales tax. An assessment is the state's conclusion about what is owed.

Can I request more time to respond?

For managed audits, extension requests can be submitted to the field office manager no later than 30 days before the most recently established completion date. Contact the Comptroller's office directly to ask whether an extension is available for other notice types.

What if I disagree with the assessment?

Submitting a written explanation with supporting documents is the first step. Taxpayers typically have 60 days from the date of a Notice of Tax Due to request a redetermination hearing.

Are penalties automatically added to the assessment?

Yes, penalties are automatically assessed according to the Texas Tax Code. A 5 percent penalty applies if tax is paid 1-30 days late, a 10 percent penalty applies if tax is paid over 30 days late, and a $50 late filing penalty is assessed on each report filed after the due date.

How long does the state take to respond to my submission?

State guidance does not specify a standard response timeframe. Processing times vary based on the complexity of the issue and the current office workload.

What happens if I cannot pay the full amount?

The Comptroller's office considers payment plans on a case-by-case basis to avoid placing undue hardship on taxpayers. Contact the office listed on the notice to discuss options.

Will this affect my business license?

Yes, the Texas Comptroller has explicit statutory authority to suspend or revoke sales tax permits for failure to file reports, pay taxes, or post required security bonds after conducting a hearing.

Can I appeal the assessment?

Texas law provides a process for appealing sales tax penalties. The enforcement notice should include information about appeal rights.

Closing

Receiving a sales tax enforcement action is stressful, but it is a manageable administrative process. The key is to respond promptly and provide clear documentation of the business's position.

Understanding the notice, gathering necessary records, and submitting a timely response keep the business in control of the situation. If there is uncertainty about any part of the process, reaching out to the Texas Comptroller or a qualified tax professional can provide clarity and support throughout the resolution.

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.