Part II. National Sales and Use Tax

SECTION 7. RECOVERY OF TAXES, PENALTY, AND INTEREST
 

(A) All sums of money imposed by the national sales and use tax and paid by a purchaser to a seller shall be and remain public money, the property of the United States Treasury, and the seller shall hold the same in trust for the sole use and benefit of the national government until deposited at an authorized federal depository.

(B) If a person neglects or refuses to pay, collect or remit the national sales and use tax as required, a duly qualified Officer of the National Tax Service shall make an assessment, based upon such information as may be available, of the amount of taxes due for the period for which the taxpayer is alleged delinquent and shall add thereto the appropriate penalty and interest on such delinquent taxes and shall within ten days of the date of the determination deliver a written Assessment / Preliminary Notice of Deficiency of the estimated taxes, penalty and interest to the alleged delinquent taxpayer by first-class certified mail to their last known address on file with the National Tax Service.

(1) The Assessment / Preliminary Notice of Deficiency shall indicate and include:

(a) the name of the alleged taxpayer,

(b) their last known address on file with the National Tax Service,

(c) the date of the Assessment / Preliminary Notice of Deficiency,

(d) a statement about the alleged taxable activity upon which the alleged tax is due,

(e) the amount of the tax and the date on which it was due,

(f) any penalties and interest due and the date of the accrual thereof.

(C) An alleged delinquent taxpayer may, within thirty days of receiving an Assessment / Preliminary Notice of Deficiency, request a hearing with a duly appointed Officer of the National Tax Service to review the facts of the case.

(1) The hearing, when requested, shall be held within thirty days of the request date.

(2) The District Director, or a duly qualified deputy, shall, within ninety days of the date of an Assessment / Preliminary Notice of Deficiency, review the facts of the case, including the records of any hearing(s) held, and shall make a Preliminary Determination based upon the best available information.

(3) Written notice of the Preliminary Determination shall be delivered to each person receiving an Assessment / Preliminary Notice of Deficiency by first-class certified mail to their last known address on file with the National Tax Service. A Preliminary Determination may dismiss the Assessment / Preliminary Notice of Deficiency, or may revise and reissue an Assessment / Preliminary Notice of Deficiency, or may issue a Final Notice of Deficiency.

(4) A Final Notice of Deficiency shall indicate and include:

(a) the name of the taxpayer,

(b) their last known address on file with the National Tax Service,

(c) the date of the Final Notice of Deficiency,

(d) the amount of the tax and the date on which it was due,

(e) any penalties and interest due and the date of the accrual thereof, and

(f) a notice of lien that the National Tax Service claims a first and prior lien on the taxpayer’s business property as provided by law.

(D) A person receiving a valid Final Notice of Deficiency from a District Office of the National Tax Service may, within thirty days of receiving such notice, challenge the notice by:

(1) remitting the amount of the alleged tax, including any penalties and interest, and filing a written appeal for refund stating the pertinent facts of the case and the reason(s) for the refund request with the Regional Executive Director of the National Tax Service, or;

(2) posting a third-party surety or a cash bond for the alleged tax, excluding any penalties and interest, with the National Tax Service and filing suit for relief with a court of competent jurisdiction, or;

(3) claiming inability to post bond or inability to pay the tax, penalty or interest without suffering undue damage and petitioning a court of competent jurisdiction for a review of the facts in the case and, at the court’s discretion, immediate dismissal of all or any part of the alleged liability.

(E) The Regional Executive Director, or a qualified deputy, shall, within sixty days of the date of an appeal for refund of taxes paid under a Final Notice of Deficiency, review the appeal and issue a Final Determination. No penalties shall accrue after the date of filing this appeal. A Final Determination shall either affirm, revise or dismiss the Final Notice of Deficiency. Revisions or dismissals in favor of the applicant shall be accompanied with an applicable refund of excessive monies paid, if any, plus the interest due on such monies calculated at the rate of 12 percent annually. The issuance of a Final Determination by the National Tax Service, whether or not accompanied by a refund, shall not be construed to prohibit any person from seeking relief for damages from courts of competent jurisdiction.

(F) Taxpayers who are successful in obtaining relief, including partial relief, in courts of competent jurisdiction from false allegations of national sales and use taxes owed shall be awarded by the court monies equal to the sum of their legal fees plus twice the amount of tax relief ordered by the court. Taxpayers who are unsuccessful in obtaining relief in courts of competent jurisdiction from allegations of national sales and use taxes owed shall be subject, at the court’s discretion, to the payment of court costs, of all legal fees, and, in cases where surety rather than cash bonds were posted with the National Tax Service, the accrued amount, as of the date of the court’s decision, of penalties and interest on taxes owed.

(G) The National Tax Service may treat any taxes, penalties and interest shown on an unchallenged Final Notice of Deficiency that is more than sixty days old as a debt due the National Tax Service. The District Director, or a duly qualified deputy, may issue a Notice of Levy against the business goods and business fixtures of any seller dealing in commerce, said Notice of Levy being delivered by registered mail to the seller at the seller’s last known address or posted at the seller’s place of business. A Notice of Levy shall indicate:

(1) the name of the taxpayer,

(2) their last known address on file with the National Tax Service,

(3) the date of the Notice of Levy,

(4) the amount of the tax and the date on which it was due,

(5) any penalties and interest due and the date of their accrual.

(H) In an attempt to settle the alleged tax debt expressed in a Final Notice of Deficiency, ten days after the delivery or posting of a valid Notice of Levy, the District Director, or a duly qualified deputy, may file a certified copy of the Notice of Levy with any appropriate local Clerk’s or Recorder’s Office.

(1) Collection of any alleged tax debt by levy may not proceed until a warrant for distraint is issued by a court of competent jurisdiction. A warrant of distraint may be issued only upon presentment of facts to create probable cause and supported by a sworn or affirmed oath. The presentment of facts and oath shall become part of the record against the alleged taxpayer.

(2) Upon issuing a warrant of distraint the District Director, or a duly qualified deputy, may request the Attorney General or any District Attorney to commence action for recovery of taxes, penalty and interest due, or may issue a warrant directed to the local Sheriff or to the chief law enforcement officer of any political subdivision of the States or Territories of the United States, authorizing the Officer, as provided by law and subject to the additional limitations listed herein, to levy upon, seize and sell sufficient business goods and business fixtures of the seller as may be found within the Officer’s jurisdiction. Local Sheriffs or chief law enforcement officers shall be entitled, for the execution of valid warrants, to such fees as are allowed by law for similar services.

(I) The national sales and use tax shall be a first and prior lien upon the business accounts, business goods, and business fixtures of any seller dealing in commerce, excepting any stock of perishable goods sold or for sale in the ordinary course of business, and shall take precedence, except as otherwise provided herein, on all such business property over other liens or claims of whatsoever kind or nature.

(1) No notice of lien shall be filed without proper certification. Certification shall indicate and include:

(a) that an Assessment / Preliminary Notice of Deficiency was properly issued,

(b) that a hearing was held within 30 days or that a hearing was not requested,

(c) that the District Director reviewed the facts within 90 days of the hearing,

(d) that a Preliminary Determination was issued,

(e) that a Final Notice of Deficiency was issued.

(J) The remedies of liens, levies and of garnishment against personal property not used in business shall not apply to the collection of assessed national sales and use taxes, or to penalties and interest imposed thereon, if such property can be reasonably identified as not being used in business, nor shall such collection action be taken against the stockholders of a corporation, other than the responsible officers, nor against the partners of a partnership, other than the general partner or the responsible officers of the partnership.

(K) The real or personal property of an innocent third party owner who has made a bona fide lease to a seller dealing in commerce shall be exempt from tax levies and liens against that seller if such property can be reasonably identified from the lease description and that the lessee has no present or future ownership rights to the property listed.

(L) The national sales and use tax for any period, including any associated interest and penalties, shall not be assessed, nor shall any Notice of Levy be issued, or warrant for collection issued, or suit for collection begin, nor any other action to collect the same be commenced more than two years after the date on which the tax was payable or due.

(1) No collection action of any kind, other than suits in courts of competent jurisdiction, shall continue more than three years after the date on which the tax was due.

(2) A Notice of Levy, even when valid and properly filed, is automatically invalid three years after the date when the taxes indicated were due.

(3) Before the period of limitation expires, the taxpayer and the District Director, or a duly qualified deputy, may agree in writing to an Offer in Compromise in partial settlement of taxes due or to an extension of the limitation for a specified period, and that period may be subsequently similarly extended.

(M) The remedies of liens and levies against personal property and of garnishment shall not apply to the collection of assessed national sales and use taxes, or to penalties and interest imposed thereon, nor shall such collection action be taken against the stockholders, other than the responsible officers, of a corporation nor against the partners of a partnership, other than the general partner or the responsible officers of the partnership.

(M) All liabilities for the national sales and use tax plus any imposed penalties and interest are immediately dischargeable in an action of bankruptcy by a court of competent jurisdiction.

Read Explanation and Details for Section 7.