What should I do if I receive a sales tax notice from a state?

Don’t ignore it and don’t panic. Read the notice, identify what type it is, note the deadline, and respond appropriately.

Key takeaways

• Read the notice carefully: identify what type of notice it is, information request, nexus questionnaire, audit initiation, proposed assessment, or final billing
• Note the response deadline immediately: most notices have 30-60 day response windows; missing the deadline can waive your right to contest or result in automatic assessment
• Common notice types and what they mean:
  • Nexus questionnaire: the state is asking whether you have nexus, respond honestly; this often precedes an audit or registration requirement
  • Registration demand: the state believes you have nexus and is demanding registration; register if correct, respond with a nexus analysis if you believe you don’t have nexus
  • Proposed assessment: the state has calculated what it believes you owe; you have the right to contest it within the stated window
  • Audit initiation letter: an audit has been officially opened; this is the point to engage a professional
  • Billing notice: a balance is due from a prior assessment or late return; verify the amount and pay or dispute within the deadline
• Don’t respond to an audit initiation without professional guidance: auditors are experienced; self-represented sellers often concede more than necessary
• Don’t assume the notice is correct: states make errors; proposed assessments based on estimated sales or nexus assumptions may be contestable
• Keep a record of all correspondence: date-stamp every notice received and every response sent; if there’s a dispute about timelines, documentation is critical