Virginia Sales Tax Enforcement Actions Checklist
Introduction
A Virginia sales tax enforcement action is an official notice from the Virginia Department of
Taxation indicating that sales and use tax requirements may not have been met. The notice can involve sales tax returns, use tax, delinquent taxes, or a collection action tied to the
Commonwealth of Virginia.
These notices often arrive after a filing deadline is missed or an amount remains unpaid.
Prompt, organized action lowers penalties, limits interest growth, and reduces the chance of escalation into formal collection process steps.
What This Notice Means
A notice usually means Virginia tax has identified a potential compliance gap for Virginia sales tax, sales and use tax, or consumer use tax reporting. The issue may involve failure to file, late payment, an erroneous refund, or an assessment period review linked to tax information already in state systems.
It does not automatically mean fraud, compensatory damages, or criminal exposure applies. It does mean the Tax Commissioner’s office expects a response, and specific notices trigger strict deadlines under the Code of Virginia.
Why the State Sent This Notice
Virginia tax issues enforcement action notices to enforce State Taxes and maintain consistent administration under the Virginia Code and Virginia tax rulings. Common triggers include missing returns, mismatched payments, audit findings from a Virginia tax audit, or data flags tied to remote sellers and marketplace facilitators.
Other drivers include economic nexus questions, remote seller nexus rules shaped by South
Dakota v. Wayfair, and Virginia Code Section 58.1-612 registration requirements for in-state dealers and out-of-state dealer activity. Changes in current and past legislation, including SB
1495 and SB 1083, can also influence how transactions to Virginia customers are reviewed.
What Happens If You Ignore This Notice
Ignoring a notice can move the account deeper into the Collection of State Taxes process.
Virginia may issue a notice of assessment, pursue collection action through a collection agency, or initiate installment agreements only after additional steps and verification.
If delinquent taxes remain unresolved, enforcement tools may include a Memorandum of Lien, wage garnishment, or a bank levy. In urgent cases, a jeopardy assessment or an Assessment of omitted taxes approach can be used when the department believes collection is at risk.
Checklist: What to Do After Receiving This Notice
Step 1: Identify the notice type and tax periods
Read the entire notice to confirm whether it is informational, a request for records, a notice of assessment, or a post-assessment collection action. Record the tax periods, filing deadline stated, and any reference numbers needed to discuss the account.
Step 2: Confirm the business identity and registration status
Verify the legal name, physical locations, and whether the account is registered to collect sales tax for the periods listed. Confirm whether the business qualifies as an in-state dealer, a remote seller's operation, or a marketplace facilitator participant.
Step 3: Determine whether the economic nexus applies
Review annual Virginia gross sales and transactions to Virginia customers to confirm whether remote seller nexus rules apply. Document the role of any fulfillment center or marketplace facilitators that handled checkout, tax calculation, or remittance.
Step 4: Assemble returns, filings, and payment proof
Gather sales tax return confirmations, copies of filed returns, and any use tax reporting that supports compliance for the periods listed. Collect bank confirmations, payment receipts, and records showing how amounts were applied to Virginia tax accounts.
Step 5: Reconcile reported sales to records
Match sales totals to books, POS reports, and bank deposits to explain variances and ensure reported taxable sales align with records. Note sales tax rates applied, local differences, and any sales tax holidays affecting taxable treatment.
Step 6: Organize exemption and sourcing support
Compile documentation for exempt transactions and confirm that sales shipped to Virginia addresses are sourced correctly. If the issue relates to use tax, identify purchases where tax was not charged, and document use tax treatment.
Step 7: Choose the correct response path
If a notice requests filing, promptly submit any missing sales tax returns and document acceptance in the system. If a balance is due and correct, plan a tax payment or request a payment plan through installment payment agreements where eligible.
Step 8: Protect appeal rights when an assessment is involved
If the notice is a notice of the evaluation or references an assessment date, confirm the appeals window and prepare a written response if disputing liability. Keep submissions organized and dated to preserve rights under the Code of Virginia.
Step 9: Contact the Virginia tax office using the notice details
Use the contact information on the notice and ask what specific action Virginia requires to stop escalation. Request clarification on the assessment period, the breakdown of the amount, and whether the account is in collections status.
Step 10: Address collection warnings immediately
If the notice references Memorandum of Lien, wage garnishment, or bank levy risk, treat the issue as urgent and ask what prevents recordation or third-party action. If hardship exists, ask about the Offer in Compromise and other relief options that depend on eligibility.
Step 11: Confirm receipt and track account updates
After filing, payment, or document submission, confirm posting via the official account tools and retain the confirmation numbers. Maintain a consolidated view of notices, payments, and communications until the balance shows resolved.
- 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 12: Build a compliance file for future cycles
Keep copies of filed returns, payment evidence, nexus analysis notes, and correspondence in one permanent folder. Include notes on local enforcement questions, registration changes, and the steps taken to prevent repeat delinquent taxes.
Common Mistakes to Avoid
Paying without confirming the notice type can waste time when the real issue is failure to file or misapplied payments. Missing an appeal deadline tied to a notice of assessment often limits options even when records support a correction.
Assuming marketplace facilitators continuously shift responsibility can lead to underreporting when the seller still has filing duties. Ignoring lien and levy language increases the risk that a
Memorandum of Lien, wage garnishment, or bank levy will impact bank accounts.
Frequently Asked Questions
Does an enforcement action always mean an audit is happening?
No, an enforcement action can be triggered by late filing, late payment, or data mismatches without a Virginia tax audit. A separate audit notice typically identifies an audit period and records request.
What if the business is a remote seller with no physical locations in
Virginia?
Remote sellers can still have sales tax obligations under economic nexus rules based on transactions to Virginia customers and annual Virginia gross sales. Registration to collect sales tax may be required even if there are no physical locations.
Can Virginia take money from bank accounts?
If delinquent taxes remain unresolved, Virginia taxpayers can use collection tools, including a bank levy. Early contact and verified payment arrangements reduce the chance of third-party enforcement.
What is a Memorandum of Lien, and why does it matter?
A Memorandum of Lien is a recordation that can attach to property interests and appear in public records. It can complicate financing, real estate transactions, and other dealings tied to the Commonwealth of Virginia.
Are payment plans available for sales and use tax balances?
Many taxpayers can request a payment plan through installment agreements or installment payment agreements, depending on status and eligibility. If the balance is unmanageable, an
Offer in Compromise may be considered based on program criteria.
Closing
A Virginia Department of Taxation enforcement action is a procedural signal that sales and use tax compliance must be addressed quickly and accurately. The best outcome typically comes from identifying the notice type, reconciling records, and responding through the proper channel.
When the matter involves delinquent taxes, structured action helps avoid escalation into the formal collection process, including the recording of a Memorandum of Lien, wage garnishment, or a bank levy. Maintaining a transparent compliance file supports future filings and reduces the risk of repeat enforcement.
Facing State 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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