Texas Comptroller Increases Sales Tax Audits

 

Tax practitioners are still waiting for the IRS to accelerate their notice letters and accompanying collection actions, after announcing earlier this year that the notices would resume their Covid hiatus, after tax season. So far, no acceleration.

 

The Texas Comptroller has filled that void, sending notices of sales tax audits to many more taxpayers. I base this on the number of calls my office has received from taxpayers who have received notices of a sales tax audit.

 

So, let’s take a moment to review a few things to keep in mind when dealing with the Texas Comptroller, just in case you receive that audit letter.

1. The Comptroller staff are professional, efficient, well-managed, very knowledgeable, etc., etc. You get the picture – you’re dealing with a well-run machine and one that knows their subject matter like the back of their hand. Taxpayers must be prepared when dealing with them.

2.    2. While payment plans are available, they will not discount the amount due.  You can make sure that the amount calculated as due is correct, putting forth any facts for consideration. Once that amount is determined, the Comptroller will not discount the amount either due to circumstance or cash payment.

3.      3. This is not the Comptroller’s first rodeo – they have a lot of tools available to them to figure out how much tax is owed. They will also use estimates of business sales as a base for liability. They have one of the top analytical staff in the country. This applies to not only sales tax, but nexus jurisdiction for franchise tax.

4.     4. Taxpayers should also take the opportunity to make sure their corporations and LLC’s have not forfeited their charters by failing to file their franchise tax returns. So many taxpayers use a service to obtain a charter and the duty to file a franchise return is either not explained to them or they ignore that responsibility. Charter status could impact the assignment of sales tax liability.

5.      5. This tax liability will follow you personally.

6.    6. The Comptroller is in the game for the long haul. They routinely renew any lien or judgment they take as it is set to expire.

 

My recommendations if you receive that letter:

 

Take a breath. Contact a professional who can assist you.

Establish a line of communication with the auditor. Let him tell you his focus.

Start gathering the supporting documents. Even if you have to recreate documents, prepare summaries using those supporting documents as a basis for your reply.

Don’t play the “my records were damaged in a flood game”. You’ll just make the auditor mad and lose any points you may score with a little cooperation.

 

Bottom line is that this issue will not go away. Hit it up front.

 

We work with taxpayers like you on a regular basis. We will create a payment plan for our fee that allows you the benefit of professional representation and the flexibility to get started paying back any liability to the state.