If you collected sales tax from customers but fell behind on sending it to the Washington Department of Revenue, the situation can escalate faster than you may expect. Knowing the typical steps may help you act before the problem grows.
Penalties and interest can grow quickly
Once a payment is late, penalties start at 9% of the unpaid tax. They rise to a total of 19% if the balance is still unpaid by the last day of the following month, and to a maximum total of 29% by the last day of the second month. Each tier has a $5 minimum, and interest builds until you pay in full.
The department will waive penalties when circumstances beyond your control caused the delay. You may also qualify for a one-time waiver if you have a 24-month record of timely filing and payment. Because interest generally cannot be waived, documenting the reasons for the delay and acting promptly may help.
A tax warrant can lead to a lien and property seizure
If the balance stays unpaid, the department may issue a tax warrant, which has the force of a civil judgment. A warrant can lead to several consequences:
- Penalty: The warrant adds a 10% penalty, with a minimum of $10.
- Lien: If you do not pay within 10 days, the department files the warrant with the county superior court clerk. That filing puts a lien, or legal claim, on your real estate and on movable property such as equipment and vehicles.
- Seizure: The department may seize property or levy bank accounts to collect.
- License risk: The department may hold a hearing to revoke your business’s tax registration endorsement if a filed warrant stays unpaid for 30 days. You need this endorsement to operate legally in Washington.
Acting earlier may leave you more options:
- Before a warrant: You may qualify for a self-service payment plan of 3 to 12 months for balances between $100 and $100,000.
- After a warrant: An active warrant or lien disqualifies you from that plan, but you may still negotiate a partial payment agreement with a department revenue agent.
Penalties and interest continue to accrue during a payment plan.
Owners can be personally responsible for collected sales tax
Sales tax is trust fund money you hold for the state, not income your business keeps. If your limited liability company or corporation closes, becomes insolvent or is abandoned with a warrant unpaid, state law allows the department to pursue responsible individuals, including officers, managers and members of member-managed LLCs.
Chief executives and chief financial officers may be strictly responsible even if they did not know about the unpaid tax, while others are liable only if they willfully failed to pay.
Getting legal guidance when you fall behind on sales tax
Falling behind does not always mean you have run out of options, and acting sooner may leave more of them available.
An attorney who handles business tax matters can review your notices, explain which options may fit your situation and communicate with the department on your behalf. No one can promise a particular outcome, but understanding where you stand may help you plan your next step.