Texas Sales Tax Liens: How Fast They Happen and How to Stop Them

The Texas Comptroller’s Office uses sales tax liens to enforce companies’ obligation to pay what they owe. Once the Texas Comptroller assesses a company’s sales tax liability, the company is obligated to pay, and penalties begin accruing after 30 days. Interest begins to accrue after 60 days as well. While penalties and interest are intended as incentives to pay on time, the Texas Comptroller’s Office also has the ability to impose tax liens for delinquent payments.

Texas sales tax liens can have a variety of financial and legal implications for companies of all sizes. Tax liens can not only result in forced payment of a company’s sales tax liability, but they can also impair a company’s ability to sell encumbered assets, secure credit, and pursue other business opportunities. As a result, companies facing Texas sales tax liens need to respond appropriately—and this starts with avoiding the imposition of a tax lien, if possible.

Tax Liens Are Required By Law in Texas

Not only does the Texas Comptroller’s Office have the ability to impose tax liens for delinquent payments, but the imposition of tax liens is required by Texas law. As the Comptroller’s Office explains, “[s]tate law requires that all past due taxes, fines, interest, and penalties owed to the state must be secured by a lien.” Additionally, under Section 113.006(b) of the Texas Tax Code:

“One tax lien notice is sufficient to cover all taxes of any nature administered by the comptroller, including penalty and interest computed by reference to the amount of tax, that may have accrued before or after the filing of the notice.”

In other words, having a tax lien imposed as the result of an unfavorable Texas sales tax audit can have wide-reaching consequences that extend far beyond the business’s current sales tax liability. Given that tax liens are required by law in relevant cases, it is imperative for companies to challenge auditors’ determinations of their sales tax liability when warranted.

Avoiding a Tax Lien After an Unfavorable Texas Sales Tax Audit

For companies that are facing the possibility of a Texas sales tax lien following an unfavorable audit, avoiding a lien generally involves resolving the company’s sales tax liability—whether through payment of the amount due or through a successful challenge (or both). Companies that cannot afford to pay what they owe may also be able to negotiate an installment agreement with the Texas Comptroller’s Office that allows them to pay over time without facing enforcement.

Companies that are facing a possible Texas sales tax lien can challenge the Texas Comptroller’s determination of their liability through the appeals process. This can involve either attempting to reach an informal resolution, pursuing an appeal with the State Office of Administrative Hearings (SOAH), or seeking judicial review in Texas state court. Some examples of potential grounds for challenging an unfavorable Texas sales tax audit determination and seeking to avoid a tax lien include:

• Misinterpretation of the Law – Misinterpretations of Texas’s sales tax laws can lead to the unwarranted imposition of liability. This includes misinterpretations of the rules regarding nexus, taxable goods and services, and other fundamental issues.
• Misapplication of the Law – Misapplication of Texas’s sales tax laws to the specific circumstances at hand can also lead to unwarranted sales tax liability. Due to the complexity of Texas’s sales tax laws and the complexity of many companies’ tax scenarios, these errors are not uncommon.
• Sampling Errors – Sampling errors during the auditing process are also common issues that can lead to excessive sales tax liability.
• Calculation Errors – Calculation errors are common as well. If auditors inaccurately calculated your company’s sales tax liability for any reason, your company should not face the severe consequences of having a tax lien imposed.
• Other Flaws in the Auditing Process – Various other flaws in the auditing process can also warrant appeals and termination of the Texas Comptroller’s efforts to impose a tax lien.

In some cases, seeking a partial lien release may be an option. If a sales tax lien cannot be avoided entirely and there are no better alternatives available, it may be possible to work with the Texas Comptroller’s Office to secure a partial lien release that allows for the unencumbered disposition of a particular corporate asset.

Tax Liens Are Not the Only Concern for Companies Facing Sales Tax Liability in Texas

While tax liens present substantial concerns and can warrant challenging an unfavorable Texas sales tax audit on their own, they are not the only concerns for businesses facing significant sales tax liability. As the Texas Comptroller’s Office also explains, nonpayment of a company’s sales tax liability can lead to other consequences as well. These include, but are not limited to:

• Asset seizures and freezes
• Holds on state warrants payable to the company
• Security bonds
• Permit suspensions
• Other administrative, civil, and criminal consequences

With these concerns in mind, an informed, strategic, and proactive approach is critical for at-risk businesses. As discussed above, this will often involve filing an appeal. Companies can appeal the Texas Comptroller’s determination of their sales tax liability on various grounds, and pursuing an appeal in good faith can stay enforcement.

However, penalties and interest can continue to accrue during the appeals process, so company owners and executives must decide how best to proceed under the circumstances. Our firm has extensive experience representing companies in significant Texas sales tax controversies, and our lawyers can provide the advice and insights that company leaders need to make informed decisions with their companies’ immediate and long-term best interests in mind.

Request a Call with a Texas Sales Tax Lawyer at Brown PC

Companies that are facing Texas sales tax liens should act promptly to preserve their legal options and protect their legal and financial interests to the fullest extent possible. If you would like to speak with a Texas sales tax lawyer at Brown PC, please call 888-870-0025 or request a call online today.