Statute of Limitations for Sales Tax Audit (State-by-state Guide)

by | Jan 28, 2020

Summary: Each state has a defined lookback period they use when examining a sales tax audit and assessment. Most states’ statutes of limitations do not apply in the event of fraudulent behavior or evasion.

How Far Back Can I Owe Sales Tax?

If you’re concerned about what your company could owe in the event of a sales tax audit, the first thing you should do is determine how far back an auditor can inspect your transactions and sales tax returns. This is commonly referred to 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 3 years, then generally an auditor can only look at transactions and returns 3 years from when the return was filed or the return due date (whichever comes later).

 

What Happens If I’m Beyond the Statute of Limitations for Sales Tax Audit?

Many people wonder if they are totally clear if they are beyond the statute of limitations for sales tax audit. Not exactly. Like all things in the sales tax world, there are exceptions. 

In many states, if the auditor believes that the tax base (basically, how much you could owe) is misrepresented by a certain amount (typically 25%), then the statute of limitations can usually be increased to a much larger time frame.

You should also know that the statute of limitations for sales tax audit is generally not in effect if there were instances of evasion, gross negligence, or fraudulent behavior. Basically, if you were doing something wrong (like not collecting and remitting sales tax) and you knew you should have been doing it, then the auditor could throw out the lookback period altogether.  

You should also note that the statute of limitations listed below may not apply for other tax types such as gross receipts tax. So pay special attention to states with gross receipts taxes, such as Washington, Texas, Delaware, Nevada, and Ohio. 

 

What Are My Options if I Think I Might Owe Sales Tax?

The first thing you should do is determine what your “exposure” is. And by this, we mean calculating how much tax you would owe if you came clean to the states.

The second thing you should do is determine if there are any amnesty programs or Voluntary Disclosure Agreement (VDA) programs available in the state. These programs can limit the interest and penalties you might have to pay. 

But if you don’t want to deal with all of this yourself (who does?) then you should consider working with us. We help our clients eliminate the hassle and stress of sales tax by handling everything for them, and reducing their risk of a costly audit. You can learn more by clicking here. 

 State-by-state Statute of Limitations for Sales Tax Audit 

State Statute of Limitations for Sales Tax Assessments
Alabama Alabama Code 40-2A-7(b)(2) defines the statute of limitations for sales tax assessment as 3 years from either the return due date or the return filing date (whichever comes later). However, if the taxable sales are misreported by more than 25%, then the statute of limitations is increased to 6 years. 
Arizona Arizona Revised Statute 42-1104  defines the statute of limitations for sales tax assessment as 4 years from either the return due date or the return filing date (whichever comes later). However, if the taxable sales are misreported by more than 25%, then the statute of limitations is increased to 6 years.
Arkansas Arkansas Code 26-18-306 defines the statute of limitations for sales tax assessment as 3 years from either the return due date or the return filing date (whichever comes later). However, if the taxable sales are misreported by more than 25%, then the statute of limitations is increased to 6 years.
California California Tax Code 6487(a) defines the statute of limitations for sales tax assessment as 3 years from either the end of the calendar month following the quarterly period for which the assessment impacts or the return filing date  (whichever comes later). However, if no return was filed then the assessment period is expanded to 8 years.
Colorado Colorado Revised Statute 39-26-125 and 39-26-107 defines the statute of limitations for sales tax assessment is 3 years from either the return due date or the return filing date (whichever comes later). 
Connecticut Connecticut General Statute 12-415(f) defines the statute of limitations for sales tax assessment as 3 years from either the end of the calendar month following the tax period or the return filing date (whichever comes later). 
District of Columbia The District of Columbia Code 47-4301 defines the statute of limitations for sales tax assessment as 3 years from either the return due date or the return filing date (whichever comes later). However, if the taxable sales are misreported by more than 25% then the statute of limitations is increased to 6 years.
Florida Florida Statute 95.091(3) defines the statute of limitations for sales tax assessment as 3 years from either the return due date, tax due date, the return filing date, or any time a refund or credit is available to the taxpayer (whichever comes later). 
Georgia Georgia Code 48-2-49 defines the statute of limitations for sales tax assessment as 3 years from either the return due date or the return filing date (whichever comes later).
Hawaii Hawaii Revised Statute 237-40 defines the statute of limitations for sales tax assessment as 3 years from either the return due date or the return filing date (whichever comes later).
Idaho Idaho Code 63-3633 defines the statute of limitations for sales tax assessment as 3 years from either the return due date or the return filing date (whichever comes later). However, if no return was filed then the period is extended to 7 years.
Illinois Illinois Title 86 Administrative Code 130.815 defines the statute of limitations for sales tax assessment as 3 years from which the taxable gross receipts was received.
Indiana Indiana Code 6-8.1-5-2 defines the statute of limitations for sales tax assessment as 3 years from either the return filing date or the end of the calendar year when the return was due (whichever comes later).
Iowa Iowa Code 423.37 defines the statute of limitations for sales tax assessment as 3 years from either the return filing date.
Kansas Kansas Statutes 79-3609(b) defines the statute of limitations for sales tax assessment as 3 years from the return filing date. However, in the event that a false or fraudulent return was submitted, the period is extended to 2 years from the date the fraud was discovered.
Kentucky Kentucky Revised Statute 139.620(1) defines the statute of limitations for sales tax assessment as 4 years from either the return due date or the return filing date (whichever comes later).
Louisiana Louisiana Revised Statute 47:1580 defines the statute of limitations for sales tax assessment as 3 years from the return due date.
Maine Maine Revised Statute Title 36, 141 defines the statute of limitations for sales tax assessment as 3 years from either the return due date or the return filing date (whichever comes later). However, if the taxable sales are misreported by more than 50%, then the statute of limitations is increased to 6 years.
Maryland Maryland Code 13-1102 defines the statute of limitations for sales tax assessment as 4 years from the tax due date. There are no limitations if proof of fraud or gross negligence is available. 
Massachusetts Massachusetts General Laws Chapter 62C, Section 26 defines the statute of limitations for sales tax assessment as 3 years from the return due date.
Michigan Michigan Compiled Laws, Section 205.27a(2) defines the statute of limitations for sales tax assessment as 4 years from either the return due date or the return filing date (whichever comes later). However, in the event that a false or fraudulent return was submitted, the period is extended to 2 years from the date the fraud was discovered.
Minnesota Minnesota Statute 289A.38 defines the statute of limitations for sales tax assessment as 3.5 years from either the return due date or the return filing date (whichever comes later). However, if the taxable sales are misreported by more than 25% then the statute of limitations is increased to 6.5 years.
Mississippi Mississippi Code 27-65-42 defines the statute of limitations for sales tax assessment as 3 years from the return filing date.  
Missouri Missouri Revised Statute 144.220 defines the statute of limitations for sales tax assessment as 3 years from either the return due date or the return filing date (whichever comes later).
Nebraska Nebraska Revised Statute 77-2709 defines the statute of limitations for sales tax assessment as 3 years from the later of the date the return was filed or the last day of the calendar month following the tax period. 
Nevada Nevada Revised Statute 360.355 defines the statute of limitations for sales tax assessment as 3 years from the return filing date or the last day of the calendar month following the tax period (whichever comes later). However, the statute of limitations may increase to 8 years from the last day of the month following the tax period if no return is filed.
New Jersey New Jersey Statute 54:32B-27(b) defines the statute of limitations for sales tax assessment as 4 years from the return filing date.  However, in the event of “willfully false or fraudulent return with intent to evade,” the statute of limitations may be longer.  
New Mexico New Mexico Statute 7-1-18 defines the statute of limitations for sales tax assessment as 3 years from the end of the calendar year in which the tax payment was due.  However, if sales tax was underreported by more than 25%, the statute of limitations is increased to 6 years. The statute of limitations is increased to 7 years if no return was filed from the end of the calendar year in which that tax payment was due.  Additionally, the statute of limitations can be increased to 10 years from the end of the calendar year in which the tax payment was due if a fraudulent return was filed.  
New York New York Tax Law 1147(b) defines the statute of limitations as 3 years from the date of the return due date or the return filing date (whichever comes later). 
North Carolina North Carolina General Statute 105-241.8 defines their statute of limitations for sales tax assessment as 3 years from the later of the return due date or the return filing date.  
North Dakota North Dakota Century Code 57-39.2-15 defines the statute of limitations as 3 years from the later of the return due date or the return filing date.  However, if no return was filed or the tax was understated by 25% or more, the statute of limitations can be extended to 6 years. 
Ohio Ohio Revised Code 5739.16(A) defines the statute of limitations for sales tax assessment as 4 years from the return due date or return filing date (whichever comes later). However, the statute of limitations period does not apply if the taxpayer has not filed a return or if the taxpayer collected taxes but failed to remit them to the state.  
Oklahoma Oklahoma Statute, Title 68, Section 223 defines the statute of limitations for sales tax assessment as 3 years from the later of the return due date or return filing date.  
Pennsylvania Pennsylvania 72 P.S. 7258 defines the statute of limitations for sales tax assessment as 3 years from the later of the return filing date or the end of the year in which the liability arose.  
Rhode Island Rhode Island General Laws 44-19-13 defines the statute of limitations for sales tax as 3 years from the return filing date or the 15th of the month following the month in which the return was due (whichever comes later).  
South Carolina South Carolina Code Section 12-54-85 defines the statute of limitations for sales tax assessments as 3 years from the later of the date the return was filed or due to be filed.  However, the statute of limitations does not apply in the following circumstances: fraudulent intent to evade taxes, the taxpayer failed to file a return, or understatement of tax by 20% or more. 
South Dakota South Dakota Codified Laws 10-59-16 defines the statute of limitations for sales tax assessment as 3 years from the return filing date.  
Tennessee Tennessee Code 67-1-1501(b) defines the statute of limitations for sales tax assessment as 3 years from the end of the calendar year in which the return was filed.  
Texas 34 Texas Administrative Code 3.339(a) defines the statute of limitations for sales tax assessment as 4 years from the tax due date.  However, if the tax was understated by 25% or more, there is no limitation period.  
Utah Utah Code 59-12-110 defines the statute of limitations for sales tax assessment as 3 years from the return filing date.  
Vermont Vermont Statutes Annotated, Title 32, 9815(b) defines the statute of limitations for sales tax assessment as 3 years from the later of the return due date or the return filing period. However, if the tax was understated by 20% or more, the statute of limitations can increase to 6 years from the return filing date. 
Virginia Virginia Code 58.1-634 defines the statute of limitations for sales tax assessment as 3 years from the tax due date.  However, if no return was filed or a fraudulent return was filed, the statute of limitations is increased to 6 years. 
Washington Washington Revised Code 82.32.050(4) defines the statute of limitations as 4 years from the close of the tax year in which the liability arose.  However, the statute of limitations period does not apply to a taxpayer that has not registered or has committed fraud or misrepresentation.  
West Virginia West Virginia Code 11-10-15 defines the statute of limitations as 3 years from the later of the return due date or the return filing date.  
Wisconsin Wisconsin Statute 77.59(3) defines the statute of limitations as 4 years from the return filing date.  
Wyoming Wyoming Statute 39-15-110(b) defines the statute of limitations as 3 years from the date of delinquency.  
Disclaimer: Our attorney wanted you to know that no financial, tax, legal advice or opinion is given through this post. All information provided is general in nature and may not apply to your specific situation and is intended for informational and educational purposes only. Information is provided “as is” and without warranty.

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