We Help With Texas Sales Tax Audits
You probably found us by searching for “Texas sales tax attorney” or “Texas Comptroller Tax Attorney.” We are glad you did. The Texas sales tax is one of the Texas-specific taxes that we help with. We help with Texas sales tax audits, appeals, and litigation.
Sales tax audits should not be taken lightly. The Texas Comptroller has broad assessment powers when it comes to Texas sales tax audits. Its agents often exercise these powers to significantly increase the amount of tax due.
Texas sales tax audits often result in large tax debts. These tax debts can be so large that the business cannot pay the taxes. The result is often that the business is forced to close and the state pursues the owner for the back taxes.
Texas Sales Tax Audits are Different than IRS Audits
If you have had an IRS audits, that experience may not translate to the Texas sales and use tax audit. Texas sales tax audits are significantly different than IRS audits.
Sales tax audits are handled by the Texas Comptroller of Public Accounts. These auditors typically do not have the resources, training, or experience that IRS auditors have.
The Texas Comptroller auditors do not have as broad a focus as IRS auditors. They do not have to administer thousands of pages of tax laws, court cases, and administrative guidance. Texas tax laws are not nearly as extensive. Texas auditors focus in on a very narrow set of laws and tax issues, as explained below. This narrow focus helps Texas Comptroller auditors hone in on problems quickly. This can make sales tax audits more difficult to handle than IRS audits.
About Texas Sales Tax Audits
The Texas sales tax auditor will typically start by examining a business’ revenue. This includes examining the business’ gross receipts reported on the Federal income tax returns, bank deposits, bank account records, and accounting records. Any variance is usually presumed to be taxable income.
The audit will also examine Texas sales tax collected versus sales tax remitted. This involves comparing the revenues received by the business as reflected in its accounting and bank records and comparing that to the Comptroller’s payment records. The Comptroller takes this “tax collected but not remitted” very seriously.
The audit will also focus on items that the taxpayer claims are not taxable. This may include out-of-state sales and sales made to exempt entities. The Comptroller frequently challenges these sales. This may include scrutinizing invoices and resale and exemption certificates. Any oversight in these records often results in the transaction being subject to tax.
The audit will also usually address use tax not paid for out-of-state purchases. The focus for this part of the audit is on the business’ fixed asset schedules and vendor cost records. If the business cannot show that the out-of-state retailer remitted sales tax, the auditor is likely to conclude that the business should have remitted use tax for the item.
Preparing for a Texas Sales Tax Audit
The Comptroller will send out an initial audit letter for sales tax audits. The audit itself will usually start in about 60 days from the date of this letter. This gives the business time to prepare for the audit.
The business should take this time to reconcile and review its books. This includes checking to ensure that the Federal gross receipts, bank deposits, and accounting records all tie to the Texas sales tax reports. It also includes checking to see that the tax collected ties to the amounts paid to the Comptroller.
Accounting summaries, resale and exemption certificates, and source documents should be gathered to present to the auditor. Efforts should be made to update the records and gather or fix any missing certificates. These records should be provided to the auditor upfront if possible. The goal of providing this information is to let the auditor know that you have already reviewed and addressed any deficiencies.
Disputing the Sales Tax Audit Results
The auditor will usually issue a preliminary audit assessment notice. This notice can allow the business to request an Independent Audit Review Conference.
The audit will close with the auditor scheduling an exit conference. This conference is a meeting to discuss the audit findings and remedies available to the business.
Comptroller issue a notice of audit results or notice of tax due. The notice of tax due triggers the period to file for an administrative redetermination. Absent filing an administrative redetermination, the business can also pay the tax and file a refund claim.
The business can also sue the Comptroller in Travis County district court or in their local district court. Texas sales tax audits cannot be appealed or handled in the U.S. Tax Court.
Help With Your Texas Sales Tax Audit
We help with Texas sales tax audits. We have an enviable track record in handling Texas sales tax audits. This includes audits, appeals, and litigation involving Texas sales tax.
Texas Sales Tax Law Articles
More Texas sales tax articles.