What Happens If Your Business Doesn’t Pay Mississippi Sales Tax?

As a business owner, the responsibility to collect and transmit Mississippi sales tax is a significant obligation. While the state may give a little more flexibility when it comes to securing income taxes, they aren’t nearly as lenient with sales tax. Sales tax is a trust fund tax, which means that it belongs to the government. Your role as a business owner is solely to collect the tax from customers and hold onto it until it is time to pass it along to the Department of Revenue. 

Failure to do so can lead to significant penalties, personal tax assessments, involuntary collections, and even legal charges in some cases. Whether you’ve failed to collect sales tax or you’ve collected it but have not passed it along to the Department of Revenue, it is crucial that you take immediate action. Learn more about the risks of failing to pay sales tax, what may happen if you do not remedy the situation, and how the team at Damiens Law can help you.

Key Takeaways

• Businesses in Mississippi must file tax returns and pay sales tax monthly, quarterly, or annually, depending on how much they owe.
• Failure to pay on time results in penalties and interest that can bulk up your tax bill as long as the balance remains unpaid.
• The Department of Revenue may revoke your sales tax license, place a lien on your assets, or seize your assets to recover past-due sales tax.
• Individuals can be held personally liable for sales tax collected by businesses.

Your Requirements as a Business Owner

As a business owner, you are required to have the appropriate sales tax permit and number, collect tax on all qualifying transactions, file the appropriate tax return, and deposit the sales tax. You are also required to maintain your records for no less than four years, although the Department of Revenue does recommend keeping records longer.

What Causes the DOR to Start Collection Efforts

Those who have nexus in Mississippi are required to file sales and use tax returns annually, quarterly, or monthly. Returns must be filed and taxes must be paid no later than the 20th of the month following the month in which the period ended. 

Falling behind on scheduled returns and payments is a common reason for the Department of Revenue to begin enforced collection efforts. They dial up the urgency when a business begins filing and paying late on a regular basis, as this indicates a serious problem that may continue to escalate until the Department of Revenue intervenes.

You may also catch the Department’s attention if they find out you have been underreporting sales or revenue—a common tactic for businesses attempting to skim some money off of their collected sales tax. There are numerous ways the Department of Revenue can find out that this is happening. Vendors, employees, or others with knowledge of the company’s workings may notify them of fraud. The Department may also conduct its own investigation if you are in a high-risk industry. If they audit your business and find that you have underreported or underpaid sales tax—whether or not it was intentional—they may also take action against you.

Selling taxable goods or services without a valid sales tax permit is another reason you may be fined or otherwise penalized. You should also expect the Department of Revenue to reach out to you if your checks are returned or your electronic payments fail.

Potential Enforcement Actions

The Department of Revenue has a wide range of enforcement actions at its disposal. The longer you wait to resolve your sales tax issues, the more expensive it may become for your business. To start, the penalty for deficient or delinquent tax due to negligence or failure to comply is 10%. Interest accrues at the rate of 0.5% of the amount due per month.

If you continue to neglect your duty to pay sales tax, the Department of Revenue can and will revoke your sales tax permit. This shuts your business down and cuts off your income stream, putting your business in serious danger of permanent closure.

The Department of Revenue can also use the same collection actions it takes against any delinquent taxpayer—state tax liens, bank levies, wage garnishments, and seizure of assets to cover the tax debt. This doesn’t just include assets, income streams, and bank accounts belonging to the business. In certain circumstances, the Department of Revenue can hold any person responsible for payment of sales tax personally liable for paying the amount due.

Criminal charges are also a possibility if it’s determined that your failure to pay was the result of willful tax evasion. Willful tax evasion may be punished with fines as high as $100,000 for individuals and $500,000 for companies, as well as imprisonment for up to five years.

Could You Be Held Personally Liable?

Yes. Per the Department of Revenue, individuals, corporate officers, and shareholders who have control of filed returns (or who have the responsibility of filing returns and making payments) can be assessed for the business’s outstanding tax debts. This responsibility does not go away if the business is dissolved, terminated, or declared bankrupt. People with at least 10% of a corporation’s stock or at least 10% interest in an LLC can be held liable for sales tax, per Mississippi Code 27-65-55.

Similarly, there are cases where the IRS can hold individuals personally liable for certain business tax debts.

Your Next Steps If You’re Already Behind

First, you should commit to taking action immediately. The longer your sales tax remains unpaid, the greater the risk of liens, levies, and loss of your business license.

You should gather all relevant documentation you have so you can figure out your current position, what it will take to get caught up, and what your options are. Find out when your last sales tax return was filed and when you last made a payment, and get copies of any failed or returned payments.

If you are only slightly delinquent—you know how much you owe and can pay it in full—you may be able to pay your sales tax balance, penalties, and interest to get caught up. From there, it’s a matter of staying compliant and avoiding future issues. Should your business face tax difficulties down the road, the relief options available to you often depend on your past history of tax compliance. Getting and staying compliant now can benefit you down the road.

Your next call should be to a Mississippi tax attorney, especially if you don’t know how far behind you are, don’t know how much you owe, have no idea how to get caught up, or know that you cannot afford to pay in full. The Department of Revenue takes unpaid trust fund taxes very seriously, and an attorney can protect your business’s financial stability and continued operations while helping you find a tax resolution.

How a Tax Attorney Can Help

The tax attorneys at Damiens Law can help you tackle your sales tax debt and avoid aggressive collection efforts. We’ll immediately assess your current situation, figure out how far behind you are and what you owe, and explain potential payment options. Our team will start by responding to notices from the DOR, filing missing returns to stop accumulating penalties, and figuring out if payment plans or offers in compromise may be viable options for you. 

Throughout this entire process, we’ll work to protect your personal assets from seizure and negotiate payment options that can keep your business functional and financially stable. Should you need help with audits or appeals, we will also represent you and your business from start to finish. The entire time, we will handle all communication with the Department of Revenue so you can avoid mistakes that could harm your business.

Unpaid sales tax is a serious issue for the Department of Revenue. They view it as theft of money that belonged to them from the moment the customer paid it. Penalties and interest can cause your tax debt to snowball quickly, especially if you run a small business without the margins needed to absorb these expenses.

Getting legal representation early can help you protect yourself from aggressive collection efforts and find a resolution option that fits your needs. Contact Damiens Law online or call us at 601-576-2693 to set up a consultation now.

Sources:
https://law.justia.com/codes/mississippi/title-27/chapter-61/section-27-61-31/
https://www.dor.ms.gov/business/sales-tax-frequently-asked-questions
https://www.dor.ms.gov/business/registration-information-sales-and-use-tax-applicants
https://www.dor.ms.gov/business/mississippi-sales-and-use-taxes
https://www.dor.ms.gov/business/sales-tax-rates
https://www.dor.ms.gov/business/reporting-requirements
https://www.dor.ms.gov/business/withholding-tax-info
https://www.dor.ms.gov/node/15603