Texas sales tax assessments after an audit or redetermination hearing process can be expensive. The tax liability can crunch your company’s cash flow, put your business in jeopardy, and risk personal liability as a responsible person. Businesses in this position may benefit from pursuing a Texas sales tax payment plan through the Enforcement Division of the Texas Comptroller’s Office. These payment plans are often discretionary measures the Enforcement Division allows businesses with significant sales tax liability to use. Learn more about sales tax collection practices in Texas after an audit and how our team of Texas sales tax professionals can assist in requesting a payment plan with the Enforcement Division on your behalf.
The Sales Tax Collection Process After Receiving an Audit Results Notice in Texas
After an audit, the Comptroller’s Office will issue a Texas Notification of Audit Results or a Texas Notification of Exam Results that shows the amount of sales tax owed for the period. If you disagree with the amount of the assessment, several appeal options are available to dispute issues that could reduce the tax bill. Pursuing these appeal rights can be valuable for attempting to remove certain penalties or interest or for establishing leverage in a Compromise and Settlement Agreement, which is a form of settlement with the Comptroller’s Office.
The Notice showing a deficiency in sales tax paid becomes final within 60 days after the statement date. Full payment is due 10 days after the Notice becomes final and late payment will typically result in an additional 10 percent penalty plus continued accrual of interest. The Enforcement Division of the Texas Comptroller’s Office is responsible for collection efforts after a Notice becomes final. These efforts may include drastic measures if taxpayers are noncommunicative or show an unwillingness to make prompt payments on the sales tax debt. For example, the Enforcement Division may freeze bank accounts, file tax liens, seize assets, and liquidate those assets to recover the tax liability. In some cases, the Comptroller’s Office may also expedite the collection timeline by issuing a Jeopardy Determination. This is common in cases involving business insolvency or cases of tax fraud.
What Is a Sales Tax Payment Plan and When Can You Request One?
Businesses with concerns about their ability to timely repay owed sales tax in Texas may consider requesting terms for a payment plan through the Enforcement Division. Installment payments can be mutually beneficial tools for businesses to avoid expending limited cash balances or liquidating assets to repay hefty sales tax liability. The Enforcement Division can also benefit from an installment plan by not having to extend additional resources to collect unpaid sales tax. Seizing and liquidating assets can be a costly and time-consuming endeavor that can eat into the overall collections from a sales tax assessment. However, it’s important to note that these installment plans often have strict terms and interest will likely continue to accrue on the principal of the assessment.
In more serious cases, businesses can also submit an Insolvency Settlement Proposal. While discretionary, these proposals may be considered by r the Comptroller’s Office before a SOAH hearing is scheduled.[1] The Comptroller’s Office has the discretion to accept the terms of a proposed settlement, which generally requires evidence the collection of the total amount due would make the taxpayer insolvent.
Alternatively, an Insolvency Settlement Proposal is possible in cases where the business has no property to seize or the value of the property is less than the total amount due, and one of the following is true:
- The business is insolvent
- The business is in liquidation
- The business has ceased operations
To qualify, businesses will generally have to provide additional financial records, such as income tax reports, inventory schedules, and other business documents to establish the claims of potential insolvency.
Request a Texas Sales Tax Payment Plan with the Help of a Sales Tax Professional
Receiving notice of a large sales tax debt after an audit can be a difficult experience with concerns about repayment and sustaining your business. The guidance of an experienced sales tax professional in Texas can be pivotal in identifying available appeal options and structuring favorable installment plans with the Enforcement Division of the Texas Comptroller’s Office.
Our team at Sales Tax Helper has years of experience handling state sales tax disputes and finding solutions for business owners that allow them to move past an audit or assessment with confidence.