Short Summary: There can be significant consequences for not paying sales tax appropriately, both civil and criminal in nature. In general, if you do not collect and remit sales tax where you owe it, you may be subject to substantial penalties and interest. Any penalties assessed are determined by state policy, described in detail below.
Based on conversations we’ve had, most business owners don’t have a lot of extra time or energy to deal with sales tax. We regularly receive questions like “What happens if I don’t collect sales tax?” In this article, we are going to share what happens when a state “catches you” and determines that you have past-due sales tax returns. Basically, here is a list of the penalties for not paying sales tax.
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Generally speaking, when a state determines that you owe sales tax they will send you an assessment letter in the mail. The assessment will usually say something to the effect of “we believe you owe sales tax, and you are going to be liable for a huge sum of money unless you submit accurate sales tax returns to us.” If you receive an assessment letter from a state, don’t panic quite yet—assessed sales tax liabilities are usually much higher than the actual amount owed.
Once you received an assessment, you will need to complete the following:
Be aware that you will also have to pay a substantial amount of penalties and interest for not properly paying sales tax from the beginning.
1. You’ll have to pay for past-due sales tax out of your own pocket, since you didn’t collect it from customers. If you have a sales tax obligation but aren’t submitting sales tax returns, it is only a matter of time before the state catches up. We frequently see historical sales tax audits in the six-figures.
2. You’ll have to pay penalties and interest for failure to file and pay sales tax. These penalties vary by state, but in general you can assume that penalties and interest will roughly total 30% of the amount of sales tax due. For example, if you owe $1,000 in sales tax, on average you will owe around $300 in penalties and interest.
3. You may be subject to criminal penalties if you showed intent to defraud the state. This one is pretty rare, and hopefully doesn’t apply to your situation. But if you are involved in a sales tax “cover-up”, the states will not look favorably on your case.
Please see below for state-by-state information regarding penalties for criminal failure to file or pay sales tax.
Alabama’s criminal failure to file penalty is a misdemeanor with a $25 – $500 fine.
Willful failure is a misdemeanor with up to $25,000 ($100,000 for a corporation) fine and/or imprisonment for up to 1 year.
Maine’s criminal failure to file sales tax penalty is a class D crime. Subsequent offenses are Class C crime.
Intent to evade: Class D crime. Class C if tax exceeds $2,000 or for subsequent offense. Class B if subsequent offense and tax exceeds $2,000.
Maine’s criminal failure to pay sales tax penalty is a class D crime. Subsequent offenses are Class C crime.
Intent to evade: Class D crime. Class C if tax exceeds $2,000 or for subsequent offense. Class B if subsequent offense and tax exceeds $2,000.
Michigan’s criminal failure to file sales tax penalty is a felony. Up to $5,000 fine and/or imprisonment for up to 5 years.
Knowing violation: Misdemeanor. Up to $1,000 fine and/or imprisonment for up to 1 year.
Michigan’s criminal failure to pay sales tax penalty is a felony if there is intent to defraud or evade. Up to $5,000 fine and/or imprisonment for up to 5 years.
Knowing violation: Misdemeanor. Up to $1,000 fine and/or imprisonment for up to 1 year.
Oklahoma’s criminal failure to file sales tax is as follows:
Intentional disregard: Misdemeanor. Up to $5,000 fine and/or imprisonment for up to 1 year.
Intent to defraud or evade: Felony. $1,000 – $50,000 fine and/or imprisonment for 2 – 5 years.
West Virginia’s criminal failure to pay sales tax penalty is a misdemeanor. $100 – $2,500 fine and/or imprisonment for up to 6 months.
Failure to pay tax collected: Felony if tax not paid is $1,000 or more. $5,000 – $25,000 fine and/or imprisonment for 1 – 3 years. Misdemeanor if tax not paid is less $1,000. $500 – $5,000 fine and/or imprisonment for up to 6 months.
Generally speaking, civil penalties will apply if you were trying to pay sales tax in earnest but had difficulty meeting the filing deadline or making a payment in time. Please see below for state-by-state information regarding penalties for civil failure to file or pay taxes.
| STATE | Failure to File Penalties | Failure to Pay Penalties |
| ALABAMA | Alabama has a penalty for failing to file sales tax returns on-time of 10% of the sales tax due or $50. | Alabama has a penalty for failing to pay sales tax on time of 10% of the sales tax due. |
| ARIZONA | Arizona has a penalty for failing to file sales tax returns on-time of 4.5% of the sales tax due per month or fraction (maximum 25%). | Arizona has a penalty for failing to pay sales tax on time of 0.5% of the sales tax due per month or fraction (maximum 10%) |
| ARKANSAS | Arkansas has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due per month or fraction (maximum 35%). | Arkansas has a penalty for failing to pay sales tax on time of 5% of the sales tax due per month or fraction (maximum 35%). |
| CALIFORNIA | California has a penalty for failing to file sales tax returns on-time of 10% of the sales tax due. | California has a penalty for failing to pay sales tax on time of 10% of the sales tax due. |
| COLORADO | Colorado has a penalty for failing to file sales tax returns on-time of 10% of the sales tax due plus 0.5% of the tax due per month (maximum 18%) or $15. | Colorado has a penalty for failing to pay sales tax on time of the greater of 10% of the sales tax due plus 0.5% of the tax due per month (maximum 18%) or $15. |
| CONNECTICUT | Connecticut has a penalty for failing to file sales tax returns on-time of 15% of the sales tax due or $50. | Connecticut has a penalty for failing to pay sales tax on time of the greater of 15% of the sales tax due or $50. |
| DISTRICT OF COLUMBIA | The District of Columbia has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due per month or fraction (maximum 25%). | The District of Columbia has a penalty for failing to pay sales tax on time of 5% of the sales tax due per month or fraction (maximum 25%). |
| FLORIDA | Florida has a penalty for failing to file sales tax returns on-time of 10% of the sales tax due (minimum of $50). | Effective July 1, 2023 Florida has a penalty for failing to pay sales tax on time of 11% of the sales tax due (minimum of $50). Previously it was 9%. |
| GEORGIA | Georgia has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due or $5 per 30 days (maximum 25% or $25). | Georgia has a penalty for failing to pay sales tax on time of the greater of 5% of the sales tax due or $5 per 30 days (maximum 25% or $25). |
| HAWAII | Hawaii has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due per month or fraction (maximum 25%). | Hawaii has a penalty for failing to pay sales tax on time of up to 25% of the sales tax due. |
| IDAHO | Idaho has a sales tax penalty for Failure to File of the greater of 5% of the sales tax due per month (maximum 25%) or $10. | Idaho has a penalty for failing to pay sales tax on time of 0.5% of the sales tax due per month (maximum 25%). |
| ILLINOIS | Illinois has a penalty for failing to file sales tax returns on-time of 2% of the sales tax due (maximum $250). | Illinois has a penalty for failing to pay sales tax on time of 2% of the sales tax due if paid within 30 days; 10% of the sales tax due if paid after 30 days but within 90 days; 15% of the sales tax due if paid after 90 days but within 180 days; 20% of the sales tax due if paid after 180 days. |
| INDIANA | Indiana has a penalty for failing to file sales tax returns on-time of 10% of the sales tax due. | Indiana has a penalty for failing to pay sales tax on time of 10% of the sales tax due. |
| IOWA | Iowa has a penalty for failing to file sales tax returns on-time of 10% of the sales tax due. | Iowa has a penalty for failing to pay sales tax on time of 5% of the sales tax due. |
| KANSAS | Kansas has a penalty for failing to file sales tax returns on-time of 1% of the sales tax due per month or fraction (maximum 24%). | Kansas has a penalty for failing to pay sales tax on time of 1% of the sales tax due per month or fraction (maximum 24%). |
| KENTUCKY | Kentucky has a penalty for failing to file sales tax returns on-time of 2% of the sales tax due per 30 days or fraction (maximum 20%) or $10. | Kentucky has a penalty for failing to pay sales tax on time of the greater of 2% of the sales tax due per 30 days or fraction (maximum 20%) or $10. |
| LOUISIANA | Louisiana has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due per 30 days or fraction (maximum 25%). | Louisiana has a penalty for failing to pay sales tax on time of 5% of the sales tax due per 30 days or fraction (maximum 25%). |
| MAINE | Maine has a sales tax penalty for Failure to File of the greater of 10% of the sales tax due or $25. | Maine has a penalty for failing to pay sales tax on time of 1% of the sales tax due per month or fraction (maximum 25%). |
| MARYLAND | Maryland has no penalty for failure to file sales tax returns by the due date | Maryland has a penalty for failing to pay sales tax on time of Up to 10% of the sales tax due. |
| MASSACHUSETTS | Massachusetts has a penalty for failing to file sales tax returns on-time of 1% of the sales tax due per month or fraction (maximum 25%). | Massachusetts has a penalty for failing to pay sales tax on time of 1% of the sales tax due per month or fraction (maximum 25%). |
| MICHIGAN | Michigan has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due if filed within two months and an additional 5% of the sales tax due per month or fraction after two months (maximum 25%). | Michigan has a penalty for failing to pay sales tax on time of 5% of the sales tax due if paid within two months and an additional 5% of the sales tax due per month or fraction after two months (maximum 25%). |
| MINNESOTA | Minnesota has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due. | Minnesota has a penalty for failing to pay sales tax on time of 5% of the sales tax due per 30 days or fraction (maximum 15%). |
| MISSISSIPPI | Mississippi has a penalty for failing to file sales tax returns on-time of 10% of the sales tax due. | Mississippi has a penalty for failing to pay sales tax on time of 10% of the sales tax due for first offense; 15% of the tax due for second; 25% of the tax due for third; 50% of the tax due for any subsequent offense. |
| MISSOURI | Missouri has a penalty for failing to file sales tax returns on-time of 6% of the sales tax due per month or fraction (maximum 25%). | Missouri has a penalty for failing to pay sales tax on time of 5% of the sales tax due. |
| NEBRASKA | Nebraska has a penalty for failing to file sales tax returns on-time of the greater of 10% of the sales tax due or $25. | Nebraska has a penalty for failing to pay sales tax on time of the greater of 10% of the sales tax due or $25. |
| NEVADA | Nevada has a penalty for failing to file sales tax returns on-time of 10% of sales tax due. | Nevada has a penalty for failing to pay sales tax on time of up to 10% of the sales tax due. |
| NEW JERSEY | New Jersey has a penalty for failing to file sales tax returns on-time of $100 plus 5% of the sales tax due per month or fraction (maximum of 25%). | New Jersey has a penalty for failing to pay sales tax on time of 5% of the sales tax due. |
| NEW MEXICO | New Mexico has a penalty for failing to file sales tax returns on-time of the greater of 2% of the sales tax due per month or fraction (maximum 20%) or $5. | New Mexico has a penalty for failing to pay sales tax on time of the greater of 2% of the sales tax due per month or fraction (maximum 20%) or $5. |
| NEW YORK | New York has a penalty for failing to file sales tax returns on-time of 10% of the sales tax due for the first month plus 1% per month or fraction (maximum 30% and minimum of $50), if the return is late by 60 days or less. | New York has a penalty for failing to pay sales tax on time of 10% of the sales tax due for the first month plus 1% per month or fraction (maximum 30%). |
| NORTH CAROLINA | North Carolina has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due if the failure is for not more than one month, with an additional 5% for each additional month, or fraction (maximum 25% in aggregate) or $5, whichever is greater. | North Carolina has a penalty for failing to pay sales tax on time of 10% of the sales tax due subject to a $5 minimum. |
| NORTH DAKOTA | North Dakota has a penalty for failing to file sales tax returns on-time of the greater of 5% of the sales tax due per month or fraction (maximum 25%) or $5. | North Dakota has a penalty for failing to pay sales tax on time of greater of 5% of the sales tax due or $5. |
| OHIO | Ohio has a penalty for failing to file sales tax returns on-time of the greater of 10% of the sales tax due or $50. | Ohio has a penalty for failing to pay sales tax on time of the greater of 10% of the sales tax due or $50. |
| OKLAHOMA | Oklahoma has a penalty for failing to file sales tax returns on-time of 25% of the sales tax due if not filed within 10 days after written demand. | Oklahoma has a penalty for failing to pay sales tax on time of 10% of the sales tax due if not paid within 15 days. |
| PENNSYLVANIA | Pennsylvania has a penalty for failing to file sales tax returns on-time of the greater of 5% of the sales tax due per month or fraction (maximum 25%) or $2. | Pennsylvania has a penalty for failing to pay sales tax on time of 3% of the sales tax due per month (maximum 18%). |
| RHODE ISLAND | Rhode Island has a penalty for failing to file sales tax returns on-time of 10% of the sales tax due. | Rhode Island has a penalty for failing to pay sales tax on time of 10% of the sales tax due. |
| SOUTH CAROLINA | South Carolina has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due if the failure is for not more than one month, with an additional 5% for each additional month or fraction of the month(maximum 25%). | South Carolina has a penalty for failing to pay sales tax on time of 0.5% of the sales tax due for the first month, with an additional 0.5% per each additional month or fraction of a month (maximum 25%). |
| SOUTH DAKOTA | South Dakota has a penalty for failing to file sales tax returns on-time of the greater of 10% of the sales tax due or $10. | South Dakota does not have any provisions for failing to pay sales tax late. |
| TENNESSEE | Tennessee has a penalty for failing to file sales tax returns on-time of the greater of 5% of the sales tax due per 30 days or fraction (maximum 25%) or $15. The interest rate on unpaid tax is 12.25% (13.25% for installment payments) after July 1st, 2023. | Tennessee has a penalty for failing to pay sales tax on time of the greater of 5% of the sales tax due per 30 days or fraction (maximum 25%) or $15. |
| TEXAS | Texas has a penalty for failing to file sales tax returns on-time of the greater of 5% (plus an additional 5% if more than 30 days late) or $1. | Texas has a penalty for failing to pay sales tax on time of the greater of 5% (plus an additional 5% if more than 30 days late) or $1. |
| UTAH | Utah has a penalty for failing to file sales tax returns on-time of the greater of 10% of the sales tax due or $20. | Utah has a penalty for failing to pay sales tax on time of the greater of 2%, 5% or 10% of the sales tax due or $20. |
| VERMONT | Vermont has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due per month or fraction (maximum 25%). | Vermont has a penalty for failing to pay sales tax on time of 5% of the sales tax due per month or fraction (maximum 25%). |
| VIRGINIA | Virginia has a penalty for failing to file sales tax returns on-time of the greater of 6% of the sales tax due per month or fraction (maximum 30%) or $10. | Virginia has a penalty for failing to pay sales tax on time of the greater of 6% of the sales tax due per month or fraction (maximum 30%) or $10. |
| WASHINGTON | Washington has a penalty for failing to file sales tax returns on-time of 5% of tax the department has determined to be due, increased to 15% if not paid by the date in the notice, and increased to 25% if not paid within 30 days following the due date in the notice (minimum $5). | Washington has a penalty for failing to pay sales tax on time of 9% of the sales tax due, increased to 19% if not paid by the end of the month following the due date, and is increased to 29% if not paid by the second month following the due date (minimum $5). |
| WEST VIRGINIA | West Virginia has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due per month or fraction (maximum 25%). | West Virginia has a penalty for failing to pay sales tax on time of 0.5% of the sales tax due per month or fraction (maximum 25%). |
| WISCONSIN | Wisconsin has a penalty for failing to file sales tax returns on-time of 5% of the sales tax due per month or fraction (maximum 25%). | Wisconsin has a penalty for failing to pay sales tax on time of 5% of the tax owed per month or fraction (maximum 25%). |
| WYOMING | Wyoming has a penalty for failing to file sales tax returns on-time of $10 ($25 if not filed within 30 days of notice to file). | Wyoming has a penalty for failing to pay sales tax on time of 10% of the sales tax due. |
