Texas Sales Tax Demand Notice: Complete Breakdown

Thousands of Texas business owners receive a Texas Sales Tax Demand Notice annually from the Comptroller’s office. For many, it arrives unexpectedly and often causes confusion or concern. The notice means the state believes taxes remain unpaid or reports were not filed correctly, and it requires a prompt response to avoid further penalties or enforcement actions.

Many taxpayers feel overwhelmed when this document appears. It is easy to assume the worst; however, the notice is not a final judgment. It is the state’s formal way of alerting you to a problem in your sales tax account and offering an opportunity to fix it before more serious steps are taken. Whether you own a small café, a retail store, or a contracting business, understanding what the notice means is the first step toward resolution.

This guide provides a complete breakdown of how the Texas Sales Tax Demand Notice works, why it is issued, and what options are available to protect your business. You will learn how to identify the cause of the notice, meet important filing deadlines, and contact the Comptroller’s office for tax relief or payment arrangements. By taking informed, timely action, most taxpayers can resolve these notices efficiently and prevent additional costs or disruptions to their business operations.

What's a Texas Sales Tax Demand Notice?

A Texas Sales Tax Demand Notice is an official letter issued by the Texas Comptroller of Public Accounts to inform taxpayers that money is owed for unpaid or underpaid sales tax. It is more than a simple reminder. This notice serves as a billing statement and a formal warning that immediate payment or corrective action is required. Once received, the clock starts toward additional penalties, interest, and possible enforcement if the balance is not resolved by the stated due date.

Definition and Purpose

The notice ensures that businesses comply with state tax laws. It details how much tax is due, when it must be paid, and what period the assessment covers. The notice also outlines how to pay, dispute, or correct an error in your sales tax records. While it may feel intimidating, it is a standard administrative step used to collect taxes and maintain accurate accounts for businesses across Texas.

Key Elements Found in the Notice

Each notice follows a consistent structure and includes several important details that help taxpayers identify and address the issue quickly:

• Taxpayer Details: The notice lists your business name, taxpayer identification number, and address as taxpayer details. These identifiers ensure that the document applies to the correct business and account.
  
  
• Amounts Due: This section breaks down the original tax balance, accrued penalties, and interest separately. This helps you understand exactly what portion resulted from late payments or unfiled returns.
  
  
• Payment and Contact Information: The notice provides step-by-step payment instructions and the Comptroller’s contact details, including a phone number and email for assistance. Taxpayers can contact the Austin, TX headquarters or their local field office.
  
  
• Response Timeline: It clearly states the payment due date and warns that additional collection actions will begin if you fail to respond.

Before addressing how to fix the issue, it is essential to understand why the Comptroller’s office sent the notice. The following section explains the most common reasons businesses receive one and how to determine which applies to your situation.

What Happens If You Ignore the Notice

Ignoring a Texas Sales Tax Demand Notice can have serious consequences. The Comptroller’s office has broad authority to collect unpaid taxes, and failure to respond within the specified period can lead to escalating penalties, property liens, and even business suspension. The longer you wait, the more complex and costly the situation becomes.

Consequences of Inaction

1. Penalty Escalation: When taxes are paid late, the state adds a 5% penalty for payments made within the first 30 days after the due date. If the payment remains unpaid after 30 days, the penalty increases to 10%. Once the date listed on the Notice of Tax/Fee Due passes, an additional 10% is added, resulting in a total penalty of 20%.
   
   
2. Interest Accrual: Besides penalties, interest begins accruing on unpaid balances on the 61st day after the original filing deadline. The interest rate is updated annually and continues to increase monthly until the full balance is paid.
   
   
3. Tax Liens and Seizures: If a taxpayer fails to address the notice, the Comptroller’s office can file a tax lien with the county clerk. This lien becomes public record and may attach to real property, bank accounts, or business equipment. The office also has the authority to freeze accounts or seize non-exempt assets.
   
   
4. Suspension of Business Permits: The Comptroller can suspend or revoke a business’s sales tax permit if the delinquency continues. Companies cannot legally collect or remit sales tax without a valid license, halting operations until the account is current.
   
   

Potential Criminal Penalties: Serious or intentional tax violations can result in criminal prosecution. Under Texas law, knowingly failing to remit collected sales tax over certain thresholds may lead to misdemeanor or felony charges, depending on the total unpaid amount.

Comparison 1: Penalties, Interest, and Payment Timelines

1. If payment is 1–30 days late:

• Penalty: 5%
• Interest Begins: No
• Account Status: This is the early penalty period. A payment plan may still be arranged during this time.

2. If payment is 31+ days late:

• Penalty: 10%
• Interest Begins: Day 61
• Account Status: The account becomes delinquent, and interest starts accruing.

3. If payment is made after the notice date:

• Penalty: 20%
• Interest Begins: Yes
• Account Status: The account becomes subject to liens, seizure, or permit suspension.

If you have received a notice, time is critical. Responding quickly can prevent these outcomes, preserve your business license, and limit additional costs. The following section outlines the practical steps you should take once a notice arrives and how to communicate effectively with the Comptroller’s office.

How to Respond: Step-by-Step

Once a Texas Sales Tax Demand Notice arrives, immediate and organized action is your best defense. Every day counts, and your response determines whether the issue stays manageable or escalates into enforcement. The process involves confirming details, gathering documentation, and contacting the Comptroller’s office before the due date expires.

Step 1: Review the Notice Thoroughly

Start by reading the entire notice carefully. Verify that your business name, taxpayer identification number, and address are correct. Note the amount due, the tax periods, and the response deadline. If anything seems unclear, highlight it for discussion when you contact the Comptroller’s office.

Step 2: Gather Documentation

Before making a payment or filing an appeal, organize all records relevant to the notice:

• Collect copies of your filed tax returns, bank statements, invoices, and payment confirmations for the period. These will help confirm whether the balance is accurate or if payments were misapplied.
  
  
• Keep previous correspondence or emails from the Comptroller’s office. Having this information ready will make it easier to explain your situation and speed up the resolution.

Step 3: Verify Filing and Payment History

Check your online account on the Texas Comptroller’s website. Confirm which returns have been filed and which payments have cleared. If you notice a missing or incorrect entry, save evidence of the correct transaction. This verification step helps identify whether the problem results from a system error, an unfiled return, or an unpaid balance.

Step 4: Determine Your Next Move

After reviewing your records, decide whether you agree or disagree with the state’s assessment:

• If you agree with the notice, pay the full balance before the due date to avoid additional penalties. You may also contact the Comptroller’s office to request a payment plan if full payment is impossible.
  
  
• If you disagree, gather supporting documents that show why the balance is incorrect. This may include proof of prior payment, corrected returns, or explanations for filing errors. You can then request a review or hearing through the Comptroller’s office.

Step 5: Contact the Comptroller’s Office

Use the contact information provided on the notice to reach out. You can call the main line at 800-252-8880, email the department, or visit your local field office in person. Representatives in Austin, TX, and regional offices can explain payment options, penalty relief, or required forms. Make sure to note the name of the person you speak with and the conversation date for your records.

Step 6: Submit Payments or Corrections

If you are paying, follow the payment instructions exactly as listed. Depending on your business account type, you may submit payments online, by mail, or in person. Always retain a confirmation number or receipt to show proof of payment. If you are filing corrections or amended returns, send them using the official Comptroller’s online submission system or the designated address.

Step 7: Document All Communication

Keep copies of every email, letter, or phone summary related to your case. These records are essential if disputes arise later or the Comptroller’s system does not reflect your payment correctly. Organized documentation demonstrates good faith and helps prevent misunderstandings during review.

Following these steps promptly can resolve the issue before it affects your business permits or property. The following section covers several resolution and tax relief options available through the Comptroller’s office for those who cannot pay the full balance.

Resolution and Relief Options

The Texas Comptroller’s office understands that many taxpayers fall behind for reasons beyond their control. Whether the cause is a bookkeeping oversight, cash flow challenge, or industry slowdown, the agency provides several ways to help you resolve a Texas Sales Tax Demand Notice without jeopardizing your business. Each program serves a specific purpose and can ease financial pressure when used correctly.

1. Payment Plans (Installment Agreements)

When paying the full balance immediately is impossible, a payment plan—an installment agreement—may provide necessary breathing room.

• Eligibility and Terms: The Comptroller’s office reviews requests individually, considering current revenue, cash reserves, and the business’s ability to make consistent payments. You must demonstrate that full payment would cause hardship but that partial, structured payments are feasible.
  
  
• Process: You can apply by contacting your local Comptroller’s field office or the main number. During this call, you will discuss your financial situation and propose a schedule that matches your business’s monthly capacity. The plan’s length usually ranges between six and twenty-four months, depending on your business's balance and financial stability.
  
  
• Conditions: Even with a payment plan, the account remains technically delinquent until fully paid. Interest continues to accrue on the unpaid portion, and existing liens or holds may remain in effect. Failure to make scheduled payments can result in immediate plan termination and reinstatement of full collection activity.

2. Penalty Waivers

A penalty waiver can reduce or eliminate specific penalties when late filing or payment was caused by reasonable circumstances rather than neglect.

• Requirements: To qualify, you must be current on all reports and taxes except for the penalty you seek to waive. The Comptroller generally denies waiver requests from taxpayers who have received one within the past two years. Compliance history, communication efforts, and prior performance are heavily considered during review.
  
  
• How to Apply: Complete and submit Form 89-224 (Request for Waiver of Penalty for Late Report and/or Payment). This form can be filed through the Comptroller’s online portal or mailed directly to the office. You should include an explanation detailing your delay and any documentation supporting your claim, such as illness records or system error logs.
  
  
• Evaluation: The review period typically lasts two to four weeks. During this time, staff members evaluate whether the error was outside your control and whether you have taken steps to prevent it from recurring. The penalty is reduced or removed if approved, but interest on the original tax amount remains payable.

3. Hardship Considerations

When genuine financial hardship prevents taxpayers from paying, the Comptroller may temporarily reduce collection pressure while arranging a longer-term plan.

• Examples: Qualifying hardships may include natural disasters, serious illness, or unexpected events that disrupt normal business operations. For example, a fire that damages inventory or a sudden drop in revenue due to economic downturns could support a hardship claim.
  
  
• Documentation: Applicants should provide evidence such as insurance claims, financial statements, or medical records. The goal is to show that the inability to pay stems from factors outside your control rather than mismanagement or neglect.
  
  
• Outcome: If approved, the Comptroller may delay active collection, temporarily lift liens, or allow extended payment timelines. This relief is not permanent but helps struggling businesses regain stability before resuming regular payments.

4. Voluntary Disclosure Agreements (VDAs)

A Voluntary Disclosure Agreement encourages honesty and compliance by rewarding taxpayers who come forward before being audited.

• Benefits: Taxpayers who voluntarily disclose unfiled or misreported sales tax can receive penalty reductions and a limited review period. This program helps those who want to correct past mistakes without facing the full weight of enforcement.
  
  
• Eligibility: You must apply before any audit or investigation begins. Once an audit notice has been issued, you can no longer qualify for the program. This rule incentivizes proactive disclosure rather than reactive correction.
  
  
• Procedure: Apply to the Comptroller’s Voluntary Disclosure Program webpage. If accepted, you will sign an agreement outlining the periods to be corrected, the amount due, and payment terms. After filing the required returns and paying the agreed balance, penalties are reduced, and your account is current.

Comparison 2: Resolution Option Overview

The following outlines the main resolution options available to taxpayers, along with eligibility criteria, required forms, account effects, and estimated timelines.

1. Payment Plan

• Eligibility: Must demonstrate financial hardship
• Required Form: Contact the Comptroller
• Effect on Account: Keeps the account in active payment status
• Typical Duration: 6–24 months

2. Penalty Waiver

• Eligibility: Current and compliant taxpayers only
• Required Form: Form 89-224
• Effect on Account: Removes or reduces penalties
• Typical Duration: 2–4 weeks

3. Hardship Relief

• Eligibility: Proof of temporary financial difficulty required
• Required Form: Written request
• Effect on Account: Pauses or reduces enforcement actions
• Typical Duration: Varies

4. Voluntary Disclosure Agreement

• Eligibility: Must not be under audit
• Required Form: Online application
• Effect on Account: Reduces penalties and limits the review period
• Typical Duration: 1–3 months

Each program offers a structured path toward resolution, but timing is crucial. The sooner you contact the Comptroller’s office, the more flexible your options will be. The following section will review a real-world case illustrating how fast communication and proper documentation can turn a stressful notice into a manageable solution.

Frequently Asked Questions

How much time do I have to respond to a Texas Sales Tax Demand Notice?

You should respond immediately because the Comptroller’s office sets strict deadlines. The due date generally appears on the first page of the notice. Penalties and interest apply if payment or action is not taken by that time. Prompt communication allows the office to discuss payment options or extensions before enforcement begins.

Can I request an extended payment period for my balance?

Taxpayers may request an extended payment plan when immediate full payment is unrealistic. The Comptroller’s office will review your business’s financial information and may approve monthly installments. Depending on approval, these plans often start within the following tax month, such as January or July. Following the schedule exactly helps you remain in good standing throughout the year.

What if I already paid but still received a notice?

The notice may result from a posting delay or an incorrect taxpayer number if you have already paid. You should immediately contact the Comptroller’s office and provide proof, such as transaction confirmations or cancelled checks. Once verified, the payment record will be updated, and any unnecessary penalties will be removed. Keep copies of all items and correspondence for your records.

Does the Texas Sales Tax Demand Notice apply to individuals or only corporations?

The notice applies to all taxpayers responsible for collecting and remitting sales tax, including individuals, corporations, and partnerships. Sole proprietors and small home-based businesses are not exempt. Each taxpayer is subject to the same reporting rules and payment deadlines. Staying compliant ensures that personal and business accounts remain in good standing with the state.

Where can I find more information about my specific notice or account?

You can read detailed information about your account by visiting the official Texas Comptroller’s website at https://comptroller.texas.gov. The site allows you to log in, view balances, print forms, and send messages to support staff. You may also post questions through the contact form or call the Austin, TX office for personalized assistance with your tax period or filing type.

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