This article covers the Texas Comptroller's state tax collection process for delinquent sales and use tax and franchise tax accounts. It does not address county-level property taxes collected by local taxing units and appraisal districts, but not the Comptroller.
When a business operating in Texas fails to file required reports or pay taxes collected under state law, the Texas Comptroller of Public Accounts initiates a structured enforcement process. Understanding each stage can help a property owner or business owner respond quickly, avoid escalating collection costs, and explore available relief options before penalties compound.
The Texas Comptroller administers 100 separate taxes, fees, and assessments. For most businesses, the two most consequential are the state sales and use tax and the franchise tax. Texas imposes a state sales and use tax rate of 6.25%. Local taxing jurisdictions, including cities, counties, transit authorities, and special districts, may add up to 2%, bringing the combined maximum to 8.25%.
Any person or entity that sells, leases, or rents taxable goods, provides taxable services, or owes use tax on items purchased from out-of-state sellers without a Texas permit is generally required to hold a sales tax permit and collect taxes from customers.
The franchise tax is a privilege tax imposed on taxable entities formed in or doing business in Texas. Even entities that owe no tax in a given year may still be required to file a report. Failure to comply with either tax program places the account at risk of collection activity.
Not every business that operates in Texas automatically owes the same taxes, but most enter the Comptroller system in one of two ways: through a sales tax permit or a franchise tax account.
Businesses that sell taxable goods or services in Texas must obtain a sales tax permit before making their first sale. The Comptroller issues the permit and carries ongoing obligations to collect taxes, file returns on time, and remit payments. Filing frequency varies by account: the Comptroller assigns monthly, quarterly, or yearly filing periods based on the volume of tax collected. Taxpayers should address compliance from the first month of operations to avoid triggering delinquency.
Taxable entities formed or registered to do business in Texas must file franchise tax reports annually. Reports are generally due on May 15, or the next business day when that date falls on a weekend or holiday. The law requires filing even if no tax is ultimately due, and a no-tax-due status does not exempt the taxpayer from the reporting requirement.
A common misunderstanding among taxpayers is that a business with low revenue or exemptions has no obligation to interact with the Comptroller. In reality, many entities below the taxable threshold must still file a no-tax-due report each year to stay current. Failure to do so triggers the same enforcement tools as an unpaid tax balance, including notices, penalties, and potential forfeiture of the right to transact business. Any person operating as a taxable entity should regularly check their account status to avoid surprises.
A tax account becomes subject to collection when a required report is not filed by its due date, when a filed report shows an unpaid balance, when an underpayment is discovered during a review, or when an audit assessment adds additional tax, penalties, and interest to the account.
When the Comptroller does not receive a required report by its due date, the account is flagged as delinquent. For sales tax accounts, this can happen as frequently as monthly. The Comptroller may issue an estimated billing based on prior filing history and instruct the taxpayer to file the actual figures. The estimated amount is not final, but it does carry penalties and interest until the correct report is filed and any tax due is paid.
A taxpayer who files a report on time but fails to pay taxes collected, or who underpays the amount shown as due, will receive a billing notice identifying the shortfall. The notice specifies the delinquent tax period, the outstanding balance, applicable penalties, and accrued interest. The taxpayer has an opportunity to respond, request a hearing, or make payment before collection activity escalates.
Some collection cases begin not with a missed deadline but with a Comptroller audit. After reviewing a business's records, the auditor may issue an assessment identifying additional tax owed. If the taxpayer disagrees with the audit findings, they may pursue reconciliation, request an independent audit review, or file for a redetermination hearing. An unpaid audit assessment is treated as a delinquent tax balance and is subject to the same enforcement tools as any other delinquent account.
When taxes go unpaid or reports are filed late, the Comptroller imposes penalties and interest in accordance with a defined schedule. These costs are imposed automatically and can significantly increase the amount a taxpayer owes if the account is not resolved quickly.
The penalty structure is as follows: a 5% penalty applies if the tax is paid between 1 and 30 days after the due date. If the payment is more than 30 days late, the penalty increases to 10%. An additional 10% penalty may be assessed after the date shown on a Notice of Tax/Fee Due, potentially bringing the total penalty to 20%. Most late-filed reports also carry a separate $50 late-filing penalty. Interest begins accruing on the 61st day after the original due date and continues until the balance is paid in full.
Penalties and Consequences:
• Late payment (1-30 days)—5% penalty
• Late payment (more than 30 days)—10% penalty
• After Notice of Tax/Fee Due Date—Additional 10% possible (up to 20% total)
• Late report filing—$50 penalty on most reports
• Interest on delinquent balance—Begins accruing on day 61 after the due date
For a taxpayer who owes a substantial balance, these collection costs compound quickly. A business owner who ignores an initial billing notice may find that collection costs and interest have added significantly to the original liability by the time enforcement escalates.
Before the Comptroller deploys more severe enforcement tools, a delinquent taxpayer typically receives a series of billing notices. These notices serve both as an accounting of the amount owed and as a formal demand to pay the taxes or respond.
The first notice sets out the delinquent tax period, the account number, the base tax amount, penalties imposed, and interest accrued. It also explains the taxpayer's right to contest the assessment by requesting a hearing. If the taxpayer disagrees with the amount shown, they must respond by the deadline stated on the notice. Failing to respond is treated as an acceptance of the stated liability, and collection activity proceeds.
Estimated billings for non-filers carry the same legal weight as a billing for an assessed balance. A taxpayer who receives an estimated billing should file the correct report and pay any amount actually due as soon as possible. The actual figures will replace the estimated amount once the report is filed, but any accrued interest and penalties will remain unless a waiver is approved.
When billing notices go unresolved, the Comptroller may use a range of enforcement tools to collect delinquent taxes. These tools apply to state business taxes such as sales and use tax and franchise tax. They do not apply to real property tax, which is administered at the local level by a county tax assessor, taxing units, and appraisal districts operating under the Texas Tax Code.
The comptroller may file a tax lien in any county where a taxpayer owes delinquent state taxes or conducts business. A tax lien attaches to the taxpayer's real property and other assets, making the delinquent balance a matter of public record. A lien can affect the ability to sell real property, refinance, obtain credit, or transfer ownership of business assets until the liability is resolved. When selling property, a delinquent tax lien will appear in a title search and must be addressed before a deed can transfer cleanly to a purchaser.
The Comptroller has the authority to freeze or seize non-exempt assets to satisfy a delinquent state tax liability. This can include business bank accounts, receivables, inventory, and equipment. The seizure process is typically reserved for cases where other collection efforts have been exhausted or where the taxpayer has not responded to notices or engaged with the Comptroller's office.
The Comptroller may initiate a hearing to suspend or revoke the taxpayer's sales tax permit. A suspended permit means the business can no longer legally collect taxes from customers, which effectively bars it from selling taxable goods or services in Texas until the permit is reinstated. The taxpayer receives advance notice of the hearing from the office and has an opportunity to respond before any action is taken. Consulting an attorney before the hearing date can help protect the taxpayer's rights under the tax code.
In some cases, the Comptroller may require a delinquent taxpayer to post a security bond as a condition of maintaining their permit or continuing to conduct business in Texas. The bond requirement is intended to protect the state's interest in future tax collections when a taxpayer's compliance history is poor.
The Comptroller may place a hold on state warrants owed to a delinquent taxpayer, such as vendor payments or tax refunds. The Comptroller may also refer delinquent accounts to private collection services, which operate under contract and may contact the taxpayer directly at their address of record. Once an account is assigned to a private agency, the Comptroller may have limited direct involvement in the collection process.
Franchise tax enforcement follows a separate but parallel track. Because the franchise tax is tied to an entity's right to exist and do business in Texas, noncompliance can result in consequences that go beyond a monetary penalty.
When a franchise tax account falls out of compliance, the Comptroller issues a Notice of Intent to Forfeit the entity's right to transact business in Texas. The governing body provides at least 45 days' notice before proceeding with forfeiture. This period is the taxpayer's window to bring the account current, file any missing reports, and pay all taxes, penalties, and interest due.
If the account is not brought current within the notice period, the Comptroller issues a Notice of Forfeiture. A forfeited entity loses its right to transact business in Texas and may be denied the ability to sue or defend itself in Texas courts. Officers and directors of the forfeited entity may also face personal liability for certain debts incurred while the forfeiture is in effect.
To reinstate a forfeited entity, the taxpayer must file all missing franchise tax reports, pay all taxes, penalties, and interest owed, and request a tax clearance letter from the Comptroller's office. The office can confirm the current account status and provide the steps required to restore the entity's right to transact business. Restoration is not automatic and must be completed before the entity can resume normal operations.
Not all collection cases begin with a missed filing. Some start with a Comptroller audit that identifies unreported or underreported tax liabilities subject to review across taxing jurisdictions. The auditing process follows a defined sequence, giving each person multiple opportunities to respond before an assessment becomes final and collection costs begin accumulating against the account number.
After a business is selected for audit, the auditor issues a notice and may send questionnaires to understand the business model and identify relevant records. The review includes an entrance conference, fieldwork, and an exit conference, during which the data reflected in the preliminary findings are shared with the taxpayer.
If additional tax is assessed, the taxpayer may pursue reconciliation, request an independent audit review, or file for a formal redetermination hearing. Any unpaid audit assessment is subject to the same tools used to collect delinquent taxes on other accounts, including a tax lien on real property, permit actions, and potential referral to the Attorney General.
At that stage, a peace officer may become involved in enforcing the court's directives, and the opportunity to arrange an installment agreement or negotiate payment terms becomes significantly more limited. Addressing the subject balance early remains the most effective way to collect taxes owed while minimizing interest and liability.
While the Texas Comptroller handles state sales and franchise taxes, property taxes on real property are administered entirely at the local level. The comptroller does not collect property tax, set property tax rates, or conduct property tax sales. Those responsibilities belong to local taxing units — including school districts, cities, counties, and special districts — working alongside county appraisal districts and county tax assessor-collectors.
Property owners with questions about delinquent property taxes, tax bills, or local collection procedures should contact their county tax assessor-collector's office directly. The comptroller's office provides oversight and assistance to local taxing units but does not intervene in local property tax collection on behalf of individual taxpayers.
Taxpayers who cannot pay a delinquent balance in full have two primary relief options: an installment agreement and a penalty waiver. Neither option is guaranteed, and both come with conditions.
The comptroller may consider a payment plan on a case-by-case basis for taxpayers who demonstrate that paying the full balance would cause undue hardship. An installment agreement allows the taxpayer to pay the delinquent liability over a defined period.
However, the account may still be subject to some collection activity during the agreement, and missing a scheduled payment can void the arrangement and trigger immediate enforcement action. Taxpayers facing financial hardship should contact the office as early as possible in the delinquency period to discuss available options.
Taxpayers who filed late or paid late may request that the Comptroller waive some or all of the penalties assessed on the delinquent account. Before a waiver will be considered, all outstanding reports must be filed, and all tax due must be paid. A prior waiver within the two-year period preceding the current request may reduce or eliminate eligibility. The Comptroller generally limits waivers to one annual period, two quarterly periods, or six monthly periods for the same account.
If the collection has already escalated to asset seizure or the account has been referred to a third-party collection service, waiver eligibility may be limited. Taxpayers who believe a penalty was imposed in error, or who have reasonable cause for the late filing or payment, should submit a written waiver request with supporting documentation as early in the process as possible.
When the Comptroller exhausts its own efforts to collect delinquent taxes without resolving the account, the case may be referred to the Texas Attorney General's Office. This referral represents a significant escalation within the Texas tax collection process. Once transferred, the Comptroller generally no longer holds jurisdiction to negotiate directly with the taxpayer unless the Attorney General requests it.
The Attorney General's Office may pursue legal action to collect the delinquent balance, including filing a lawsuit to obtain a court judgment. That judgment may allow the state to garnish accounts, file a tax lien on additional real property, or take other enforcement steps to collect taxes owed. Law firms retained by the state operate under authority granted by the referring agency. A taxpayer who reaches this stage has typically missed multiple opportunities to pay taxes and resolve liability earlier in the Texas tax collection process.
The best way to avoid Attorney General referral is to respond promptly to every Comptroller billing notice on the first day it arrives, file all missing reports, and contact the office to discuss an installment agreement or other relief options before the account escalates. Taxpayers facing hardship should search for resolution options and obtain assistance from an attorney before collection costs and penalties imposed make the balance significantly harder to resolve.
The Comptroller may assess estimated billing based on prior history, imposing penalties and interest until you file and pay taxes due. Within the Texas tax collection process, continued nonfiling across taxing jurisdictions can trigger permit suspension hearings, escalating collection costs, and compounding liability against your account.
Penalties imposed on taxpayers depend on how late the payment is received. A 5% penalty applies within 1-30 days, increasing to 10% after 30 days. An additional 10% may be assessed after a Notice of Tax/Fee Due, bringing the total to 20%, plus a $50 late-filing penalty on most reports.
For delinquent state taxes, interest begins accruing on the 61st day after the original due date. Taxpayers should pay the balance before that point to avoid additional collection costs being added to any penalties already assessed. For questions about a specific account, contact the Texas Comptroller's office directly.
Yes. The comptroller may file a tax lien in any county where a taxpayer owes delinquent state taxes, such as sales or franchise tax, or where the taxpayer conducts business. The lien attaches to the taxpayer's real property and other assets and appears in public records, which can affect the ability to sell, refinance, or transfer property until the liability is resolved.
Yes. For delinquent sales tax accounts, the Texas Comptroller may initiate a hearing to suspend or revoke your permit. A suspended permit bars your business from legally collecting tax in Texas until it is reinstated. The taxpayer receives advance notice and has an opportunity to respond, including with the assistance of an attorney, before any action takes effect.
Franchise tax forfeiture means the Texas Comptroller has revoked the entity's right to transact business in Texas due to noncompliance with franchise tax reporting or payment requirements. A forfeited entity may be barred from appearing in Texas courts, and officers may face personal liability for debts incurred while the forfeiture is in effect — an outcome that early intervention and professional assistance can help taxpayers avoid.
The comptroller may approve an installment agreement for taxpayers who demonstrate financial hardship. Taxpayers should contact the office as early as possible in the delinquency period to discuss options. Missed payments can void the arrangement and resume full collection activity against your account.
Yes. Taxpayers may submit a waiver request for penalties assessed on late-filed or late-paid accounts. All reports must be filed and all taxes paid before the Comptroller reviews any waiver. Prior waivers within the past 2 years may limit eligibility, so consult an attorney to review and obtain the best outcome.
Referral occurs after the Comptroller exhausts efforts to collect delinquent taxes. Once referred, a peace officer may assist the Attorney General in filing suit to collect the balance. Taxpayers should resolve outstanding obligations before that date, as the Comptroller no longer holds direct jurisdiction over the transferred account.
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