Falling behind on Maryland sales and use tax returns can create a serious problem for a business. Even if you did not collect much tax, failing to file required returns can lead to penalties, interest, delinquency notices, estimated assessments, and collection activity.
The problem can become more complicated when several returns are missing. You may not know which periods need to be filed, how much tax is actually owed, or whether the Comptroller has already assessed an amount against your business.
Gabaie & Associates, LLC helps Maryland businesses address unfiled sales and use tax returns and the tax liabilities that may come with them. The firm can review your tax account, determine what returns are outstanding, and help you work toward bringing the account current.
Call (410) 358-1500 or contact the firm to discuss your unfiled sales and use tax returns.
What Is Sales and Use Tax?
Maryland sales and use tax generally applies to taxable sales of goods and certain services, as well as certain purchases on which sales tax was not paid. Businesses that are required to collect and remit sales and use tax must file returns with the Comptroller according to their assigned filing schedule.
A business may have a sales and use tax filing obligation even when the amount of tax due for a particular period is zero. The Comptroller notes that a required return still must be filed when there is no tax to report.
This is important for businesses that stopped making taxable sales, had a slow period, or otherwise assumed there was no need to file. A missing return can still show as delinquent on the state’s records.
If you are unsure whether your business has a filing obligation, it is better to determine that before allowing additional periods to go unfiled.
What Happens If I Do Not File Maryland Sales Tax Returns?
When a required return is not filed, the Maryland Comptroller can treat the account as delinquent. The agency may send a notice concerning the missing return, past-due taxes, penalties, and interest.
If the missing return remains unfiled, the Comptroller may make an estimated assessment. That assessment may not reflect what your business actually sold or what it actually owed.
This can create a difficult situation. The state may be attempting to collect a balance based on an estimate while you are trying to reconstruct several months or years of business records.
Filing the missing returns can provide a more accurate picture of the business’s actual sales and tax liability.
Can I File Old Maryland Sales Tax Returns?
In many cases, yes. Businesses that have fallen behind may need to file multiple delinquent returns to bring the account up to date.
The process can be more involved when records are missing or the business has changed accounting systems. You may need to reconstruct sales, taxable purchases, exemptions, tax collected, and other information for each filing period.
Maryland’s electronic filing system allows businesses to file sales and use tax returns for applicable periods, although current filing and payment functions have moved to the Maryland Tax Connect system.
Before filing a large batch of delinquent returns, it is important to understand the status of the account. If the Comptroller has already issued an assessment or begun collection activity, simply submitting returns may not resolve everything that has already occurred.
What If My Business Has Several Unfiled Returns?
Multiple missing returns should be addressed as a group rather than one period at a time without looking at the entire account.
The first step is determining exactly which periods are missing. You also need to determine whether the Comptroller has already created estimated assessments for any of those periods.
Once the filing history is clear, the business can begin gathering the records needed to prepare the returns. Depending on how far behind the business is, those records could include:
- Sales records
- Bank statements
- Point-of-sale reports
- Invoices and receipts
- Purchase records
- Accounting records
- Prior tax returns
- Records of sales tax collected
Accurate records matter because the goal is not simply to submit paperwork. The returns should accurately report the business’s tax activity for each period.
What Are the Penalties for Late Maryland Sales Tax Returns?
A late sales and use tax return can result in penalties and interest. The Comptroller’s filing guidance states that a late return with tax due is subject to a 10% penalty on the tax due, plus interest.
The longer a return remains unresolved, the more the total liability can grow.
A business that has several unfiled returns may therefore face a balance that is substantially larger than the underlying tax originally due.
The amount shown on a state notice should not automatically be assumed to be the final amount the business owes. The account should be reviewed to determine whether the state has estimated liability, added penalties and interest, or received information that does not match the business’s records.
What If the Comptroller Estimated My Sales Tax Liability?
An estimated assessment can be particularly frustrating when the amount does not reflect your actual business activity.
If the business failed to file a required return, the Comptroller may estimate the tax due. The state itself warns that an estimated assessment may be made when a missing return remains unfiled after notice.
If you receive an assessment based on estimated sales, do not ignore it. Review the periods involved and determine whether the underlying estimate can be replaced or challenged through the appropriate filing or administrative process.
Gabaie & Associates, LLC can review the assessment and the available business records to determine what steps may be appropriate.
Can I File the Returns If I Cannot Pay the Tax?
Yes. Filing the delinquent returns and paying the resulting liability are separate issues.
You should not assume that you have to come up with the entire tax balance before addressing missing returns. The business may need to file the returns first so the actual liability can be established.
Once the amount owed is known, the business may have options for addressing the balance. Depending on the circumstances, those options may include a payment arrangement or another resolution.
Gabaie & Associates, LLC also assists businesses with Maryland tax debt and related collection problems.
Can Unfiled Sales Tax Returns Lead to Collection Action?
Yes. Unfiled returns can contribute to a larger tax problem if the business does not address them after receiving notices from the Comptroller.
Once a tax liability is established, the state may pursue collection of the unpaid balance. Depending on the circumstances, collection activity can create problems for the business and potentially affect responsible individuals.
If you have already received a collection notice, do not focus only on filing the missing returns. The underlying liability and collection status should also be reviewed.
Businesses facing broader collection problems can learn more about Maryland tax collection and the options that may be available.
How Can a Maryland Tax Attorney Help With Unfiled Sales Tax Returns?
Getting caught up on sales tax returns involves more than filling out old forms. The business needs to know which returns are missing, whether the Comptroller has issued assessments, how much tax is actually owed, and what collection issues may already exist.
Gabaie & Associates, LLC can review the business’s Maryland tax account and help address delinquent sales and use tax filings. Depending on the circumstances, the firm may help with:
- Identifying unfiled tax periods
- Reviewing state tax assessments
- Addressing estimated liabilities
- Filing delinquent returns
- Responding to Comptroller notices
- Addressing penalties and interest
- Resolving outstanding tax balances
The appropriate approach depends on the business’s filing history, records, tax liability, and current status with the Comptroller.
Maryland Unfiled Sales & Use Tax FAQs
Do I have to file a sales tax return if my business had no taxable sales?
If the business is required to file a return, a zero-tax period may still require a filing. The Comptroller advises that businesses should file required returns even when there is no tax to report.
Can I file several years of unfiled sales tax returns?
You may be able to file multiple delinquent returns, but the appropriate process depends on the periods involved and the current status of the account. If the Comptroller has already issued assessments or collection notices, those issues should be addressed as part of the process.
What happens if I ignore a Maryland sales tax notice?
Ignoring a delinquency notice can allow penalties, interest, and collection activity to continue. The Comptroller may also issue an estimated assessment when required returns remain unfiled.
Do I have to pay the full sales tax balance immediately?
Not necessarily. After the actual liability has been established, the business may have options for addressing the balance through a payment arrangement or another resolution, depending on its circumstances.
Can a tax attorney help if my business records are incomplete?
Yes. An attorney can review the available records and the state’s account to help determine what needs to be filed and how the outstanding tax issue should be addressed.
Get Help With Unfiled Maryland Sales and Use Tax Returns
Unfiled sales and use tax returns can become more difficult to resolve the longer they remain outstanding. If your business has fallen behind, the first step is finding out exactly what is missing and whether the Comptroller has already assessed tax or begun collection activity.
Gabaie & Associates, LLC helps Maryland businesses address delinquent sales and use tax returns, state tax assessments, and outstanding tax balances.
Call (410) 358-1500 or contact the firm online to discuss your unfiled sales and use tax returns.
