Tennessee Department of Revenue Proposed Assessment: Your 30-Day Window and What Comes After

Where Tennessee Tax Debt Actually Comes From

Tennessee fully repealed the Hall income tax, so there is no state tax on a Chattanooga-area resident's wages or investment income. State tax debt here comes from somewhere else: taxes on businesses and on sales.

The Tennessee Department of Revenue says it collects more than $11 billion a year, and that more than two-thirds of it comes from two taxes: sales and use tax, and franchise and excise tax. Its sales and use tax page describes the sales tax as the state's principal source of tax revenue, at roughly 60% of collections, with a 7% general state rate plus a local rate that varies by county or city.

A business owner also deals with the business tax, which has a state part and a city part. The Department says a business grossing $100,000 or more should register and remit it. These are the accounts where a missed return or an unpaid balance turns into an assessment.

The Notice of Proposed Assessment

When the Department believes a taxpayer owes more than was reported or paid, it sends a notice of proposed assessment. According to the Department's informal conference page, a taxpayer who receives one may request an informal conference, and the request must be made in writing within 30 days from the date of the notice.

Read that sentence twice. The clock runs from the date on the notice, not from the day you opened the envelope. A notice that sat in a pile of mail for two weeks has already used half the window.

What the Conference Is

At the informal conference, the taxpayer explains to a hearing officer why the proposed assessment is wrong. The Department says it will contact the taxpayer within ten days of the request to set a time and date, and that the Hearing Office now offers in-person conferences through Microsoft Teams.

The Department also says not every notice needs a hearing officer. It lists several situations that can usually be settled quickly without one:

• An estimated assessment, where the Department guessed because no return was filed.
• A return was filed, but not all the tax shown as due was paid.
• The business closed, but the tax account was never closed.
• Only a penalty was assessed, with no additional tax due.

The estimated assessment is the one that surprises people. If you stopped filing and the Department filled in a number, filing the missing returns is often the strongest answer, because actual figures replace an estimate. The same logic applies to federal non-filers, which is why the firm treats unfiled returns as the first problem to solve.

Penalty Waivers

Penalties are often the largest part of a state balance that has grown for a year or two. The Department's penalty waiver page says two things matter.

First, penalties may be waived in delinquency or deficiency cases when the taxpayer has a reasonable cause listed in state statute, Tenn. Code Ann. 67-1-803(c) and (d). Second, in delinquency cases a waiver can also be issued when the taxpayer has a good two-year filing record with the Department and no willful disregard of the law or gross negligence is involved.

The petition is filed through the Tennessee Taxpayer Access Point, known as TNTAP, by choosing Petition for Penalty Waiver. A taxpayer who cannot use TNTAP can email the Petition for Waiver of Penalty to the address the Department lists on that page. Any waiver of $100,000 or more needs the Attorney General's approval.

This mirrors the federal side. The IRS has its own reasonable-cause and first-time abatement categories, covered on the firm's penalty abatement page. The standards differ and neither agency follows the other's ruling, so a petition has to be built for the agency you are actually dealing with.

The Hearing Route That Does Not Apply

Tennessee also offers a formal Administrative Procedures Act hearing, which the Department describes as very similar to a trial, with witnesses, exhibits and rules of evidence. It is easy to assume that is where a disputed tax bill goes. The Department says otherwise on its hearing request page: issues relating to assessments or levies of taxes, fees, fines, penalties, interest, or the waiver of penalties are not eligible for an administrative hearing. Review of a proposed assessment, a refund denial or a penalty waiver denial goes through the informal conference.

That page also carries a much shorter deadline, 10 days from the date of the action complained of, for the matters it does cover, such as a proposed license revocation or confiscation of property. Picking the wrong procedure, or the wrong deadline, can cost a taxpayer the chance to be heard at all.

If the Business Is Closed or Sold

Closing the doors does not close the tax account. The Department's close your business page warns that failing to notify it of a closure or ownership change could result in an assessment for delinquent taxes, penalty and interest after the business has stopped operating. It also says a purchaser can be liable under state law for the previous owner's unpaid taxes, so purchase money should be withheld until the seller can show proof that nothing is owed.

Anyone shutting down or selling a Hixson, Red Bank or East Ridge storefront should check the account first. Our Hixson page covers the firm's work in that part of Hamilton County.

State and Federal Problems Often Travel Together

An owner who fell behind on state sales tax frequently fell behind on federal payroll deposits too. The two agencies work separately, but the cash flow problem is the same. The firm's payroll tax and installment agreement pages explain the federal options. For the state side, the Department's rules above control, and this article describes them as the Department published them. It was checked against those pages on November 3, 2026. Program details can change, so confirm the date on the notice you hold before relying on any of it.