Forgot to Collect Sales Tax? What to Do, in Order

If you forgot to collect sales tax, you still owe it, and the order you fix it in decides how much you pay. Work out what you should have charged, try to recover what you can from customers, and ask the state (or the CRA) about a voluntary disclosure before you register or file anything. The state's rules count a filed return as "contact", and contact can shut you out of the program that waives penalties.

The first reaction is usually panic, and the numbers can justify it. In an r/Bookkeeping thread asking how much a bookkeeper should know about sales tax, the original poster described owners "made to pay it out of their pockets and the amounts are huge too (in thousands or even in hundreds of thousands)." That is money that leaves the business without anything to show for it, the same kind of silent loss we list in the guide to where a small business loses money.

Do you still owe sales tax you never collected?

Yes. Sales tax is the customer's tax, but the law makes the seller responsible for collecting it, so the state bills you. In Canada, the CRA's guide for GST/HST registrants says it plainly: "If you are required to charge the GST/HST but did not charge it, you are still liable for the tax." You report it in the period you should have charged it, not the period you noticed.

Two situations get treated very differently, so work out which one you are in:

The second row happens more than owners admit. One accountant with 20 years in the r/Bookkeeping thread put it bluntly: "business owners don't forget to pay taxes. They float the balance and then it gets out of hand and then they just hope they don't get caught." If that is you, the steps below still apply, but get a professional in earlier.

Why businesses forget to collect in the first place

Most owners do not simply forget. They either did not know a sale was taxable, or they crossed a line into a new state without noticing. Four patterns cover nearly every case we see in owner threads:

1. A service that is taxable in one context and not another. In Texas, the Comptroller's repair and remodeling guide says labor to repair residential real property "is not taxable", but "the total amount charged for remodeling, repairing, or restoring nonresidential real property is taxable." A residential contractor who takes one office or restaurant job has a taxable sale they have never charged tax on.
2. The wrong local rate. Texas charges 6.25% state tax, and local jurisdictions can add up to 2% for a maximum of 8.25%. One r/Bookkeeping commenter described charging 8.25% when her husband worked from his Dallas office and 6.25% when he worked on site at a client's office in Argyle.
3. Nexus in a second state. Sell enough into another state and you can owe tax there even without an office. The Multistate Tax Commission's lookback chart notes that for sellers with economic nexus only, the lookback starts no earlier than the date that state adopted economic nexus.
4. Assuming the platform handled it. Marketplaces collect in many states, but not for sales on your own site, invoices or in person. We cover that split in the guide to marketplace facilitator rules by state.

Which pattern you fall into tells you the scope: one job, one rate, one state, or years of everything.

How much do you owe? Work out the number first

Your exposure is the tax you should have charged, plus penalties and interest, for every period the state can reach. Get the tax figure first, because every other decision depends on it.

Do it from your own records, not from memory:

1. Export every invoice or sale for the affected period from your accounting or invoicing tool.
2. Mark each line taxable or not, using your state's rules for that exact product or service.
3. Multiply taxable sales by the rate for where the sale happened, not where you are based.
4. Group it by filing period (month or quarter), because that is how penalties are calculated.

Here is what the difference looks like on a real published penalty schedule. Say a Texas contractor missed tax on $4,000 a month of nonresidential repair work at 8.25% for 18 months:

The penalty rates are from the Texas Comptroller's penalty page, which also sets a minimum of $50 or 10% of the tax, whichever is greater. The interest line is left out because it changes. Your state's numbers will be different. The shape will not: the tax is fixed, and everything on top of it depends on whether you came forward or got found.

If the number is big, it rarely arrives at a good time. Plan how you will pay it using a simple cash flow forecast before you commit to a payment date with any agency. A tax bill on top of thin margins is how owners end up busy but not making money for a year.

Can you bill the customer for the sales tax now?

Often yes for business customers, rarely worth it for consumers. A missed tax line is a billing error, and you can correct a billing error unless your contract says the price was final or tax-inclusive.

• Business customers (B2B). Send a corrected invoice with the tax shown as a separate line and a short note explaining the error. In Canada, the CRA's policy statement P-116 says that where there are no contractual restrictions, it "will continue to accept that the disclosure requirements may be met after the fact," partly because customers "may be willing to pay an additional amount... where the additional amount may be claimed as an ITC." A registered business customer usually gets the GST/HST back, so the ask costs them little.
• US business customers who already paid use tax. Some buyers self-assess use tax when a vendor does not charge it. Ask. A written confirmation from the customer can reduce what you owe, depending on the state.
• Consumers. Chasing a homeowner for a few dollars of tax on a job from last year usually costs more goodwill than it recovers. Most owners absorb these and fix the invoice template going forward.

If a customer refuses, treat it like any other underpayment. The same steps apply as when a customer short-paid the final invoice: document it, send one clear request, and decide whether the amount is worth pursuing. For a large business invoice, weigh whether a collections agency is worth its cut before you write it off.

Do not file first: the voluntary disclosure order

Ask for a voluntary disclosure agreement (VDA) before you register, file back returns or pay anything. This is the step owners get wrong most often, because filing feels like the responsible thing to do.

The Multistate Tax Commission, which runs a multistate disclosure program for its member states, spells out why: "Prior contact between a state and the taxpayer concerning a tax type disqualifies the taxpayer from participation in voluntary disclosure for that tax type. 'Contact' includes filing a tax return, paying tax, or receiving an inquiry from the state regarding the tax type."

State programs use the same test:

• Texas: you qualify only if you have "not been previously contacted by the Comptroller, either verbally or in writing, concerning a liability or estimated liability."
• Florida: you are eligible only if you "have not been previously contacted by the Department concerning the liability," and Florida's program excludes deficiencies that would routinely generate a bill anyway.

A Florida sales tax attorney explaining the program on YouTube listed what counts: "getting an audit notice counts as a contact. Getting a collections notice counts as a contact. Getting a call from a Department of Revenue person saying you need to do this can count as a contact."

So the order is:

1. Stop the bleeding. Start charging tax correctly on new sales now. Charging tax is not the same as filing a return.
2. Build the exposure number by state and period, as above.
3. Check eligibility. Has the state contacted you about this tax, in writing or by phone? If yes, a VDA is probably off the table, so go straight to filing and ask about penalty waivers and payment plans.
4. Apply for the VDA. Apply per state, or through the MTC program if several states are involved. The MTC charges nothing, but its staff will not process an application when the estimated tax for a state is under $500. For those, file directly with that state.
5. Register and file through the agreement, then pay the bill or the agreed plan.

One caution: if you are already registered and simply missed tax on some sales, most states treat that as an amended return, not a VDA. The VDA route is mainly for businesses that never registered or never filed in that state.

How far back can the state go?

Without an agreement, there may be no limit if you never filed. With one, most states cap it at three or four years. The MTC's published lookback chart for states in its National Nexus Program shows the range:

Source: MTC lookback chart. It is guidance only, and each state makes the final call. The chart also warns that sales tax "collected from others must be remitted in its entirety, may involve non-waivable penalties, and may cause the lookback period to commence when such tax was first collected."

That is the math behind "come forward early". A business that forgot for six years and comes forward in Texas pays four. One that waits for an audit pays whatever the auditor can reach, plus the 20% penalty tier.

Forgot to charge GST/HST in Canada?

The CRA treats uncollected GST/HST as your liability, but its correction tools are friendlier than most US states. Three rules matter.

When you should have started. You stop being a small supplier the day your taxable revenue passes $30,000 in a single calendar quarter. The CRA's registration page says "you have to start charging GST/HST on the supply that made you exceed $30,000." If you crossed it over four quarters instead of one, the timing is different, so check the page for your case.

Rebilling is accepted. As above, P-116 lets you issue amended invoices after the fact. For business clients registered for GST/HST, that is often the cleanest fix.

The Voluntary Disclosures Program changed on October 1, 2025. Per the CRA's summary of the changes:

Prompted applications were not eligible before, which is a real change: a CRA letter no longer closes the door. The GST/HST memorandum 16-5-1 adds that the application must cover at least one period past its filing due date, and that "payment or a request for a payment arrangement of the estimated taxes owing must be made."

The 30-minute self-check

Run this before you call anyone. It tells you whether you have a small fix or a real exposure.

1. Pull last year's invoices and filter for any line with no tax. Is each one genuinely exempt, or just untaxed?
2. Sort by customer type. Business, consumer or government? That tells you who you can rebill.
3. Sort by location. Any sales delivered or performed in another state or province? Note the totals by state.
4. Check for commercial work if you are a trade. One nonresidential job in a state like Texas changes the answer.
5. Compare tax collected to tax remitted. Pull the sales tax liability account from your books and compare it to what you filed. A growing balance means you collected and did not send it in, which is the more serious row in the first table.
6. Check your mail and inbox for anything from the state or the CRA. Any contact changes your options.

If steps 1 to 4 turn up a handful of jobs in your own state, it is usually a corrected invoice and an amended return. If step 3 or 5 turns up something, keep reading.

Step 5 is where most small businesses find surprises, because tax collected through a card processor, an invoicing app and the books rarely match without a routine. The fix is the same one we describe for reconciling invoices with QuickBooks: one monthly check that the tax you billed equals the tax you booked.

Can you fix this yourself, or do you need a pro?

A single-state miss on a few invoices is a do-it-yourself job. Multi-state exposure, collected tax that was never sent in, or anything over a few thousand dollars is worth paying a sales tax professional for.

You can handle it alone when:

• It is one state, and you are already registered there.
• The missed sales are identifiable invoice by invoice.
• The state has not contacted you.

Get help when:

• More than one state is involved. The MTC program exists for this, but deciding which states to include is the hard part.
• Tax was collected and not sent in. Relief is narrower and the lookback can be unlimited.
• You have received any notice. Your options have already narrowed.

One commenter in an r/legaladvice thread described inheriting a job where the previous person was "about $150,000 short" across four states in nine months. They filed amended returns, paid the tax "plus like $20k in late fees. And that was that." That is one person's story, not a promise, but it matches what the agencies publish: the outcome of an honest mistake is a bill, not a courtroom.

Going forward, decide who owns sales tax in your business. The r/Bookkeeping thread split on whether it is a bookkeeper's job or an accountant's, and the most useful comment was about the engagement letter: "it just needs to be clear where the responsibility lies." Then set your invoicing tool to add tax by default on taxable items, and put a monthly reconciliation on the calendar. It is one of the checks worth adding to your list of things to automate, because a tax rule on the invoice template never forgets.

If you run a restaurant and suspect the opposite problem, where you paid tax twice on delivery app orders, the restaurant sales tax refund guide covers how to claim it back.