Can You Settle Sales Tax Debt in California?

Understanding CDTFA Settlement Options for Business Owners

If you owe back sales tax to the California Department of Tax and Fee Administration (CDTFA), you may be wondering if it’s possible to settle your tax debt for less than you owe — the way you sometimes can with the IRS.

The short answer? Yes — but only in very limited cases.

California’s settlement process is different, more restrictive, and much less publicized than the IRS Offer in Compromise program. But it does exist — and in the right circumstances, it can be a powerful tool to resolve sales tax debt.

In this guide, you’ll learn:

• Who qualifies for a California sales tax settlement
• What to do if you’re ineligible
• And how to get help from a firm that knows the system

If you’re already under audit or collections, start by reviewing our page on California sales tax audit defense.

Can You Really Settle Sales Tax Debt with the CDTFA?

Yes — the CDTFA does have a settlement program, but it's:

• Highly selective
• Available only after assessment
• Best suited for closed businesses or hardship situations

The program allows certain taxpayers to settle for less than the full amount owed, including tax, penalties, and interest.

Important: The CDTFA doesn’t advertise this program. Many taxpayers (and even tax professionals) don’t know it exists.

Who Is Eligible for a CDTFA Settlement?

You may qualify if:

• You owe assessed sales tax debt (usually after audit or notice of determination)
• You can demonstrate that you’re unable to pay the full amount
• You’re not disputing liability — this is for collections, not appeals
• You’re not actively operating a business with ongoing sales tax obligations
• You’re willing to provide full financial disclosure

CDTFA settlements are not available for:

• Active, profitable businesses trying to “cut a deal”
• Undisclosed debts or ongoing audits
• Situations where fraud or suppression is suspected

CDTFA vs IRS – Key Differences in Settlement Programs

In practice: CDTFA settlements are harder to get, take longer to review, and are rarely approved without serious hardship.

What the CDTFA Considers in a Settlement Request

If you submit a settlement proposal, the CDTFA’s Settlement Bureau will evaluate:

• Your ability to pay
• The cost of pursuing full collection
• The likelihood of success if the case is litigated
• Whether the settlement is in the best interest of the state

This means:

• They’ll review all your financials
• They’ll look at other options available to them (levy, lien, garnishment)
• They’ll compare settlement to projected collection costs and ROI

What Are Your Alternatives If You Don’t Qualify?

If you’re not a candidate for a settlement, you may still resolve your sales tax debt through:

Installment Agreement

• Monthly payment plan
• Requires proof of ability to pay
• Interest continues to accrue

Partial Payments + Penalty Abatement

• Negotiate reduced penalties
• Start payment plan with financial hardship request

Appeal (If the Amount Is Disputed)

• File a Petition for Redetermination
• Pursue relief through the Office of Tax Appeals
• Present your case with documentation and expert representation

Bankruptcy (Last Resort)

• Some sales tax debt may be dischargeable if old enough and non-trust fund related
• Complex — requires legal counsel

Our Experience with California Sales Tax Settlements

At Boulanger CPA and Consulting PC, we’ve helped California business owners:

• Negotiate settlements with the CDTFA’s Settlement Bureau
• Submit financial packages that actually get considered
• Avoid criminal referrals and reduce assessments
• Position their case for the best possible outcome — even if settlement isn’t approved

We don’t just “file paperwork.” We build a strategy that gets results.

Need Help Settling Your CDTFA Debt?

If you owe back sales tax in California and feel overwhelmed, you're not alone.

We can help you:

• Evaluate whether you're a candidate for settlement
• Communicate with CDTFA collections or the Settlement Bureau
• Explore penalty relief or payment plan options
• Protect your business and your peace of mind

📍 Orange County-based. Serving all of California. 🖥 Virtual consultations available.

👉 Schedule Your Free Strategy Call Now

FAQ – CDTFA Settlement Program

📣 About the Author

Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.

He is the author of Defend What’s Yours: A California Taxpayer’s Guide to Beating the IRS and FTB at Their Own Game, available now on Amazon. The book offers a step-by-step plan for resolving IRS and FTB tax debt without losing your business, your home, or your peace of mind.

With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.

Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.

Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.

📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.