Sales tax audits statute of limitations
by January 17, 2024
Please note: This blog was originally published in 2020. It’s since been updated for accuracy and comprehensiveness.
When states started taking action against declining sales tax revenue as a result of the pandemic, they began pursuing more sales tax audits, cracking down on businesses with economic nexus that are not collecting or remitting sales tax returns. Many experts believe we’ll continue to see an increase in sales tax audits in 2024.
Diane Yetter, of YETTER, said, “I think the states have started using data analytics to identify non registrants and that this will increase. It also might mean states that hadn’t pursued companies for not registering as of the [economic] nexus date will assess those taxpayers. A few states have already been doing that.”
If your business has received notice of a sales tax audit or assessment from a state, don’t panic. Prepare. Knowing the sales tax statute of limitations by state can help.
How far back can a state inspect my transactions and returns?
In the event of a sales tax audit, the first thing your business should do is determine the lookback period, or how far back an auditor can inspect your transactions and sales tax returns. This is known as the statute of limitations for a sales tax audit or assessment.
For example, if the statute of limitations on a sales tax audit in a state is 2 years, then the auditor can only look at transactions and returns 2 years from when the return was filed or the return due date.
Keep in mind: If there were instances of evasion, gross negligence, or fraudulent behavior, the statute of limitations for sales tax audits may not apply. If your business was not collecting and remitting sales tax in a state, but you knew you should be, the auditor could throw out the lookback period altogether. In many states, if the auditor believes that the tax base (or how much you could owe the state) is misrepresented by a certain amount (like 25%), then the statute of limitations can be increased.
What do I do if I owe sales tax?
First, determine your exposure, calculating how much tax you might owe to the state based on the sales tax percentage in that state and the number and amount of transactions in that state.
Then, explore any amnesty or Voluntary Disclosure Agreement (VDA) programs available in that state, which might limit the interest and penalties you would have to pay.
If you want to prepare your business for a sales tax audit, read our step-by-step guide, How to Handle a Sales Tax Audit, to learn what documents to collect, how to negotiate with the auditor, and more.
To prevent risk of a sales tax audit, automate filing sales tax returns on time and track when your business is approaching economic nexus in every state using TaxJar.
Sales tax statute of limitations by state
Scroll through the states below to check your state’s sales tax statute of limitations. Be sure to check the citations and exceptions to read the fine print of the sales tax laws in every state.
Alabama
Statute of Limitations: 3 years from either return due date or return filing date (whichever comes later).
Exceptions: If no return is filed, or a false or fraudulent return is filed with the intent to evade tax, a sales tax audit can be entered at any time.
If the taxable sales are misreported by more than 25%, the sales tax assessment may be entered within six years from the return due date or the return filing date, whichever comes later.
Read More: Alabama Code 40-2A-7(b)(2)
Arizona
Statute of Limitations: 4 years from either the return due date or the return filing date (whichever comes later)
Exceptions: If no return is filed, or a false or fraudulent return with the intent to evade tax is filed, a sales tax audit can be entered at any time.
If the taxable sales are misreported by more than 25%, then the statute of limitations increases to 6 years.
Read More: Arizona Revised Statute 42-1104
Arkansas
Statute of Limitations: 3 years from either the return due date or the return filing date (whichever comes later)
Exceptions: In the case of a fraudulent return, or a failure to file a return required under state tax law, sales tax assessments may begin at any time.
If the taxable sales are misreported by more than 25%, then the statute of limitations increases to 6 years after the return was required to be fired or the date the return was filed, whichever period expires later.
Read More: Arkansas Code 26-18-306
California
Statute of Limitations: 3 years from the end of the calendar month following the quarterly period for which the assessment impacts or the return filing date (whichever comes later)
Exceptions: In the case of fraud, intent to evade, or failure to make a return, no return was filed in the state, then the statute of limitations increases to 8 years after the last day of the calendar month following the quarterly period for which the amount is proposed to be determined.
Read More: California Tax Code 6487(a)
Colorado
Statute of Limitations: 3 years from either the return due date or the return filing date (whichever comes later)
Exceptions: In the case of a false or fraudulent return with intent to evade tax, a sales tax assessment may be at any time.
Read More: Colorado Revised Statute 39-26-125 and 39-26-107
Connecticut
Statute of Limitations: 3 years from either the end of the calendar month following the tax period or the return filing date (whichever comes later)
Exceptions: Except in the case of fraud or intent to evade or in the case of new information that may come into the commissioner’s possession, the commissioner may not make more than one assessment for a tax period for which a return has been filed.
When it appears that there was negligence or intentional disregard of sales tax regulations, there will be a penalty equal of 15% the amount of the assessment, or $50, whichever is greater.
When it appears there was fraud or intent to evade sales tax, there will be a penalty equal to 25% the amount of the assessment.
When a business fails to file a sales tax return, the commissioner will estimate the amount of gross receipts due based on the periods the business failed to make a return. There will be an added penalty of 15% of the tax imposed on the estimate, or $50, whichever is greater.
Read More: Connecticut General Statute 12-415(f)
District of Columbia
Statute of Limitations: 3 years from either the return due date or the return filing date (whichever comes later)
Exceptions: In the case of a false or fraudulent return with the intent to evade tax or failure to file a return, a sales tax assessment may begin at any time.
If the taxable sales are misreported by more than 25%, then the statute of limitations increases to 6 years after the return was filed, whichever period expires later.
Read More: The District of Columbia Code 47-4301
Florida
Statute of Limitations: 3 years from either the return due date, tax due date, return filing date, or any time a refund or credit is available to the taxpayer (whichever comes later)
Exceptions: If the taxpayer failed to file a return, or filed a fraudulent return, a sales tax assessment can be entered at any time. If the taxpayer disclosed in writing the tax liability to the department before the department contacts the taxpayer, the statute of limitations remains at 3 years.
Read More: Florida Statute 95.091(3)
Georgia
Statute of Limitations: 3 years from either the return due date or the return filing date (whichever comes later)
Exceptions: In the case of a false or fraudulent return, or return filed with the intent to evade sales tax, or a failure to file a return, a sales tax assessment may begin at any time.
Read More: Georgia Code 48-2-49
Hawaii
Statute of Limitations: 3 years from either the return due date or the return filing date (whichever comes later)
Exceptions: In the case of a false or fraudulent return with the intent to evade sales tax, or a failure to file the return, the tax may be assessed at any time, provided that the burden of proof of falsity or fraud will lie with the state.
Read More: Hawaii Revised Statute 237-40
Idaho
Statute of Limitations: 3 years from either the return due date or the return filing date (whichever comes later)
Exceptions: In the case of a false or fraudulent return with the intent to evade sales tax, or a willful attempt in any manner to defeat or evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time.
If the taxpayer failed to file a return, the statute of limitations extends to 7 years from either the return due date or the return filing date, whichever comes later.
Read More: Idaho Code 63-3633
Illinois
Statute of Limitations: 3 years from which the taxable gross receipts were received. Assessments are issued on January 1 or July 1.
Exceptions: There is no statute of limitations when there is failure to file a return or fraudulent returns.
Read More: Illinois Title 86 Administrative Code 130.815
Indiana
Statute of Limitations: 3 years from either the return filing date or the end of the calendar year when the return was due (whichever comes later)
Exceptions: If a person files a fraudulent, unsigned, or substantially blank return, or if a person does not file a return, there is no time limit within which the department can issue its proposed sales tax assessment.
Read More: Indiana Code 6-8.1-5-2
Iowa
Statute of Limitations: 3 years from the return filing date
Exceptions: The period for the examination and determination of the correct amount of tax is unlimited in the case of a false or fraudulent return made with the intent to evade tax or in the case of a failure to file a return.
Read More: Iowa Code 423.37
Kansas
Statute of Limitations: 3 years from the return filing date
Exceptions: In the case of a false or fraudulent return with intent to evade tax, the tax may be assessed or a proceeding in court for collection of such tax may begin at any time within 2 years from the discovery of such fraud. No assessment shall be made for any period preceding the date of registration of the retailer by more than 3 years except in cases of fraud.
Read More: Kansas Statutes 79-3609(b)
Kentucky
Statute of Limitations: 4 years from the return due date or the return filing date (whichever comes later)
Exceptions: In the case of a failure to file a return or of a fraudulent return, sales tax may be assessed at any time. A notice of such assessment shall be mailed to the taxpayer.
Read More: Kentucky Revised Statute 139.620(1)
Louisiana
Statute of Limitations: 3 years from the end of the calendar year in which the tax payment was due
Exceptions: The failure to file a sales tax return will interrupt the sales tax assessment, and the assessment will not commence until the subsequent filing of the return. If a taxpayer who does not file a tax return becomes responsible for the filing of such a return because of a final court decision rendering a transaction or other activity as taxable, and the laws, regulation, or jurisprudence of this state previously classified that transaction as nontaxable, this provision shall not apply and the assessment shall run as if the taxpayer had timely filed the return.
Read More: Louisiana Revised Statute 47:1580
Maine
Statute of Limitations: 3 years from either the return due date or the return filing date (whichever comes later)
Exceptions: If tax is misreported by 50% or more, the statute of limitations becomes 6 years from the return filing date.
An assessment may be made at any time with respect to a time period for which a fraudulent return has been filed.
Read More: Maine Revised Statute Title 36, 141
Maryland
Statute of Limitations: 4 years from the tax due date
Exceptions: There is no statute of limitations in the case of fraud or gross negligence, defined as underpayment of 25% or more of the sales and use tax due.
Read More: Maryland Code 13-1102
Massachusetts
Statute of Limitations: 3 years from the return due date
Exceptions: In the case of a false or fraudulent return filed with intent to evade a tax or of a failure to file a return, the commissioner may make an assessment at any time, without giving notice of his intention to assess, determining the tax due according to his best information and belief.
Read More: Massachusetts General Laws Chapter 62C, Section 26
Michigan
Statute of Limitations: 4 years from either the return due date or the return filing date (whichever comes later)
Exceptions: A person who has failed to file a return is liable for all taxes due for the entire period for which the person would be subject to the taxes. If a person subject to tax fraudulently conceals any liability for the tax or a part of the tax, or fails to notify the department of any alteration in or modification of federal tax liability, the department, within 2 years after discovery of the fraud or the failure to notify, shall assess the tax with penalties and interest, computed from the date on which the tax liability originally accrued. The tax, penalties, and interest are due and payable after notice and hearing.
Read More: Michigan Compiled Laws, Section 205.27a(2)
Minnesota
Statute of Limitations: 3.5 years from either the return due date or the return filing date (whichever comes later)
Exceptions: The tax may be assessed at any time if a false or fraudulent return is filed or when a taxpayer fails to file a return.
If tax is misreported by 25% or more, additional taxes may be assessed within 6.5 years after the return due date or the return filing date, whichever comes later.
Read More: Minnesota Statute 289A.38
Mississippi
Statute of Limitations: 3 years from the return filing date
Exceptions: If the taxpayer fails to timely file a return, the Commissioner shall issue an assessment estimating the amount of tax due as required
Read More: Mississippi Code 27-65-42
Missouri
Statute of Limitations: 3 years from either the return due date or the return filing date (whichever comes later)
Exceptions: In the case of a fraudulent return or of neglect or refusal to make a return with respect to any tax under this chapter, there is no limitation on the period of time the director has to assess.
Read More: Missouri Revised Statute 144.220
Nebraska
Statute of Limitations: 3 years from the return filing date or the last day of the calendar month following the tax period (whichever comes later)
Exceptions: In the case of a person failing to make a return, filing a false or fraudulent return with the intent to evade the sales or use tax, or omitting from a return that an amount that is in excess of 25% of the amount of tax stated, the statute of limitations increases to 6 years after the last day of the calendar month following the period for which the amount is proposed to be determined.
Read More: Nebraska Revised Statute 77-2709
Nevada
Statute of Limitations: 3 years from the return filing date or the last day of the calendar month following the tax period (whichever comes later)
Exceptions: In the case of a failure to make a return, or a claim for an additional amount, every notice of determination must be mailed or personally served within 8 years after the last day of the calendar month following the period for which the amount is proposed to be determined.
In the cases of fraud or intentional evasion sales tax, there is no statute of limitations.
Read More: Nevada Revised Statute 360.355
New Jersey
Statute of Limitations: 4 years from the return filing date
Exceptions: In the case of a willfully false or fraudulent return with intent to evade the tax, or failure to file a return, the tax may be assessed at any time.
Read More: New Jersey Statute 54:32B-27(b)
New Mexico
Statute of Limitations: 3 years from the end of the calendar year in which the tax payment was due
Exceptions: In case of a false or fraudulent return made by a taxpayer with intent to evade tax, the amount thereof may be assessed at any time within 10 years from the end of the calendar year in which the tax was due.
Read More: New Mexico Statute 7-1-18
New York
Statute of Limitations: 3 years from either return due date or the return filing date (whichever comes later)
Exceptions: In the case of a willfully false or fraudulent return with intent to evade the tax or a failure to file a return as required by law, the tax may be assessed at any time.
Read More: New York Tax Law 1147(b)
North Carolina
Statute of Limitations: 3 years from either the return due date or the return filing date (whichever comes later)
Exceptions: There is no statute of limitations and the Secretary may propose an assessment of tax due from a taxpayer at any time if the taxpayer did not file a return, the taxpayer filed a fraudulent return, or the taxpayer attempted in any manner to fraudulently evade or defeat the tax.
Read More: North Carolina General Statute 105-241.8
North Dakota
Statute of Limitations: 3 years from either the return due date or the return filing date (whichever comes later)
Exceptions: If it is determined when completing the sales tax audit that the tax due was 25% or more above the amount reported on a return, notice of determination of tax due must be given not later than 6 years after the last day on which the return was due or 6 years after the return was filed, whichever is later.
Notice of determination of tax due for any reporting period for which a taxpayer failed to file a return must be given not later than 6 years after the due date of the return.
If fraudulent information is given in a return or the failure to file a return is due to the fraudulent intent or willful attempt of the taxpayer in any manner to evade the tax, the statute of limitations does not apply.
Read More: North Dakota Century Code 57-39.2-15
Ohio
Statute of Limitations: 4 years from either the return due date or the return filing date (whichever comes later)
Exceptions: When the tax commissioner has substantial evidence of amounts of taxes collected by a vendor from consumers on retail sales, which were not returned to the state, when the vendor assessed failed to file a return, or when the vendor or consumer and the commissioner waive in writing the time limitation, no sales tax statute of limitations apply.
Read More: Ohio Revised Code 5739.16(A)
Oklahoma
Statute of Limitations: 3 years from either the return due date or the return filing date (whichever comes later)
Exceptions: In the case of a false or fraudulent report or return, a willful attempt in any manner to defeat or evade tax, or a failure to file a report or return with intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may begin without assessment, at any time.
Read More: Oklahoma Statute, Title 68, Section 223
Pennsylvania
Statute of Limitations: 3 years from return filing date or the end of the year in which the liability arose
Exceptions:Any such assessment may be made at any time during such period notwithstanding that the department may have made one or more previous assessments against the taxpayer for the year in question, or for any part of such year. In any such case, no credit shall be given for any penalty previously assessed or paid.
Read More: Pennsylvania 72 P.S. 7258
Rhode Island
Statute of Limitations: 3 years from the return filing date or the 15th of the month in which the return was due (whichever comes later)
Exceptions: In the case of fraud, intent to evade sales tax, or failure to make a return, the statute of limitations does not apply.
Read More: Rhode Island General Laws 44-19-13
South Carolina
Statute of Limitations: 3 years from the either the return filing date or the return due date (whichever comes later) t
Exceptions: In the case of fraudulent intent to evade taxes, a failure to file a return, or an understatement of tax by 20% ore more, the statute of limitations does not apply.
Read More: South Carolina Code Section 12-54-85
South Dakota
Statute of Limitations: 3 years from the return filing date
Exceptions: If a taxpayer fails to obtain or maintain a license or permit required to engage in the activity which results in the tax obligation, if a taxpayer fails to file a required return, if a taxpayer files a return reporting tax due but fails to remit the tax reported in full, or if a taxpayer files a fraudulent report, there is no statute of limitations, or “bar to assessment or collection of taxes, penalty, or interest.”
Read More: South Dakota Codified Laws 10-59-16
Tennessee
Statute of Limitations: 3 years from the end of the calendar year in which the return was filed
Exceptions: In the case of a failure to file a return, a false or fraudulent return with the intent to evade the tax, the tax may be assessed or a proceeding to enforce the collection of such tax may begin, with or without assessment, at any time.
Read More: Tennessee Code 67-1-1501(b)
Texas
Statute of Limitations: 4 years from the tax due date
Exceptions: The statute of limitations does not apply and the comptroller may assess and collect taxes, penalties, and interest at any time if the taxpayer files a false or fraudulent sales tax return with the intent to evade the tax or the taxpayer fails to file a sales tax return.
If the tax is understated by 25% or more, what Texas deems a “gross error,” there is also no limitation period.
Read More: 34 Texas Administrative Code 3.339(a)
Utah
Statute of Limitations: 3 years from the return filing date
Exceptions: The statute of limitations does not apply if a deficiency is due to fraud or failure to file a return.
Read More: Utah Code 59-12-110
Vermont
Statute of Limitations: 3 years from the return filing period or the return due date (whichever comes later)
Exceptions: In the case of a willfully false or fraudulent return with intent to evade the tax, or failure to file a return, sales tax may be assessed at any time
If the tax was understated by 20% or more, the statute of limitations increases to 6 years from the return filing date.
Read More: Vermont Statutes Annotated, Title 32, 9815(b)
Virginia
Statute of Limitations: 3 years from the tax due date
Exceptions: In the case of a false or fraudulent return with intent to evade payment of the taxes, or a failure to file a return, the taxes may be assessed, or a proceeding in court for the collection of such taxes may be begun without assessment, at any time within 6 years from the tax due date date.
Read More: Virginia Code 58.1-634
Washington
Statute of Limitations: 4 years from the close of the tax year in which the liability arose
Exceptions: The statute of limitations does not apply to a taxpayer that has not registered, that has committed fraud or representation, or that has executed a written waiver of the limitation.
Read More: Washington Revised Code 82.32.050(4)
West Virginia
Statute of Limitations: 3 years from the return filing date or the return due date (whichever comes later)
Exceptions: In the case of a false or fraudulent return filed with the intent to evade tax, or in case no return was filed, the assessment may be made at any time.
Read More: West Virginia Code 11-10-15
Wisconsin
Statute of Limitations: 4 years from the return filing date
Exceptions: The period may be extended if the taxpayer consents in writing.
Read More: Wisconsin Statute 77.59(3)
Wyoming
Statute of Limitations: 3 years from the date of delinquency
Read More: Wyoming Statute 39-15-110(b)
