Sales tax glossary
What is penalty abatement?
Penalty abatement is a tax authority's reduction or removal of penalties charged for late filing, late payment or underpayment. Businesses usually request it in writing and must show reasonable cause, such as a serious illness, a disaster, or reliance on incorrect official advice. Interest is generally not waived.
Example
A business files late after a flood closes its office. It pays the tax owed and asks the state to abate the late-filing penalty, citing the flood.
Why it matters for sellers
Penalties can grow faster than the tax itself. Asking for abatement costs little, and most tax authorities have a formal process for it.
Related terms
This definition is general information, not tax or legal advice. Rules vary by jurisdiction and change over time.
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