Here Come the Millennial Auditors

High Sales Tax Auditor Turnover May Mean Over Assessed Sales Tax Audits

I bet a lot of you would like to know why you are getting audited by young, inexperienced and sometimes aggressive Texas Comptroller Sales Tax Auditors. To do that I must make sure you understand WHO ARE the MILLENNIALS (see below).

Baby Boomers (born 1940 – 1960, approximate period)
Generation X (born 1960 – 1980, approximate period)
Millennials (born 1980 – 2000, approximate period)

Millennial Texas Comptroller Auditors

Wikipedia defines Millennials with college degrees as those folks who DO NOT STAY at any job for more than 2 or 3 years and then move to the next job. This cycle usually continues for an average of 3 jobs before they finally settle down for the long haul. If the Texas Comptroller continues to hire young new college graduates then it is a given that most of them will quit in 2 to 3 years and move on to their 2nd job or 3rd job.

Because of the above probability you have a good chance of being audited by one of these young, inexperienced and possibly aggressive auditors. And that is bad news since auditors from the past (hired from 1980 to 2000) usually stayed around much longer, were much more experienced and were in general less aggressive. It is also likely that a 1 to 3 year old Texas Comptroller auditor will not have a firm grasp of proper auditing and estimation techniques and will certainly not know taxability as well as seasoned auditors (i.e., what is taxable and what is not).

Are Auditors Ranked on How Much Tax is Assessed?

It is a fact that the agency continues to provide most auditors with a periodic printout of HOW MUCH tax they are assessing along with other statistics such as ‘tax assessed per hour’ on tax due audits. It is inevitable that many auditors will then believe that they are being reviewed and possibly promoted based on TAX ASSESSMENT factors.

No More Tax Policy Letters

Let me add one more depressing thought. Since 2012 the Texas Comptroller has ceased to issue what are called Tax Policy Letters. These are considered by any serious Texas Sales Tax student to be the most important source of sales tax authority (trumping the statutes, tax rules and hearings). And why has the Texas Comptroller stopped issuing these critical pronouncements. It is easy. Most of the senior Tax Policy Experts have left the agency (i.e., quit, retired, died). I have written another detailed blog on this subject. It should be noted that Texas Tax Group has four former Texas Comptroller Tax Policy Experts on staff.

The takeaway here is to watch out. Take your audit and auditor seriously. If you decide to hire an outside consulting firm then you must also do your homework. Texas Tax Group is committed to a singular activity – defending and representing you with your Texas Comptroller Tax Audit.

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Sexually Oriented Business Fee (aka the Pole Tax)

If the Comptroller issued you an estimate for this fee, then it is probably wrong. Defend yourself against it now. 

Most, if not all, of these SOB fee estimated assessments are wrong. Very wrong. Consultants at Texas Tax Group (ex-Texas Comptroller auditors) have carefully reviewed the Texas Comptroller’s SOB fee estimation method on SOBF client assessments and found many errors.  These audit methodology errors can easily DOUBLE what the business actually owes in SOB fee.  Texas Tax Group can help you defend yourself against these harsh and significantly over stated assessments. (more…)

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Texas Oil & Gas -Southwest Royalties, Inc. vs. Susan Combs Most Likely Heading to Supreme Court

The issue concerning whether tangible personal property placed inside a well (i.e., “downhole”) qualifies for the manufacturing exemption has been pending in the Texas court system for several years. The trial judge ruled in favor of the Comptroller on April 30, 2012, and the Third Court of Appeals heard oral arguments on September 25, 2013. After considering the issue for almost 11 months, the Third Court of Appeals issued an opinion on August 13, 2014, affirming the trial court’s judgment for the Comptroller. (more…)

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Mixed Beverage Tax (Liquor Tax) Audit Statistics

-“Tax Due” Audits Rise to 61% of all Audit Conducted. Almost 2 out of 3 Audits are tax due.

-“Average Tax Due” Assessed is $51,447 – Not including penalties and interest

Fiscal Year Total No Tax Due Audits Total Tax Due Audits Total Assessed Amount for Tax Due Audits Ave Tax Due Amt
FY2008 288 284 $12,048,877.00 $42,425.62
FY2009 253 272 $10,633,260.00 $39,092.87
FY2010 220 255 $12,314,994.00 $48,294.09
FY2011 244 259 $13,179,747.00 $50,887.05
FY2012 285 224 $8,674,052.00 $38,723.45
FY2013 135 211 $10,855,513.50 $51,447.93
Total 1425 1505 $67,706,443.50 $44,987.67

Related Sources:
“Estimated” Sales Tax Audit
A Practical Guide to HB 3572
An Open Letter to All Mixed Beverage Permit Holders in the State of Texas
Audit Division and the Fraud Penalty

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Texas Mixed Beverage Sales Tax Report Forms for 2014

Provided below is the link to the Texas Comptroller’s website where you will be able to download the new Mixed Beverage Sales Tax Reporting Form for 2014.

Remember, this form is IN ADDITION TO the Mixed Beverage Report and the Sales and Use Tax Reports. It does NOT REPLACE any prior reports.

For expert audit representation, call Texas Tax Group today at 1-855-892-8348 and let our experienced team of 15 Former Texas Comptroller State Tax Auditors handle your mixed beverage sales tax audit.

Texas Comptroller Helpful Link:
Texas Mixed Beverage Tax Forms

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Mixed Beverage Gross Receipts Tax

Mixed Beverage Gross Receipts Tax Rate Lowered; New Mixed Beverage Sales Tax Imposed

House Bill 3572, effective Jan. 1, 2014, lowers the mixed beverage gross receipts tax rate from 14 percent to 6.7 percent. The bill also imposes an 8.25 percent mixed beverage sales tax.

Mixed beverage gross receipts tax is imposed on the mixed beverage permittee and will be administered the same as before but at a lower rate. In addition, a mixed beverage permittee will collect an 8.25 percent tax on each mixed beverage sold, prepared or served. The new sales tax is also due on ice and each nonalcoholic beverage sold, prepared or served to be mixed with an alcoholic beverage and consumed on the permitted premises. (more…)

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4 Convenient Offices across Texas

Texas Tax Group is the only firm in Texas that has offices in Houston, Dallas, Austin and San Antonio. With our extensive experience as former auditors, we actually still have relationships with some auditors, audit managers, local enforcement officials, hearings attorneys, and attorneys at the Attorney General’s office.

This is something other audit representation firms don’t have access to. Add it all up, and this is why dozens of CPA firms have us handle their clients’ Texas Comptroller tax audits.

Due to our team’s unique experience, we often have more experience than the auditor and we know the audit procedure better than the auditor! Isn’t that the kind of experience and dedicated know-how you want representing you?

Call us toll-free at 855-892-8348 to schedule your FREE Anti-Audit Consultation!

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Practitioners’ Corner

http://www.window.state.tx.us/taxinfo/prac_corner.html

We can also handle defenese for Mixed Beverage Tax Audit, Texas, Sales Tax Defense Texas, and so much more. See our Services page for more information.

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Petitioner is liable for the predecessor’s tax liabilities

“The Texas Comptroller of Public Accounts (the Comptroller) assessed successor
liability against ************** (Petitioner) for the sales and use tax
liability of a predecessor business. Petitioner contends that: (1) it is not
liable as successor because it purchased only two of the three COMPANY A stores
that the predecessor operated; and (2) imposing successor liability without
allowing Petitioner to challenge the underlying tax determination violates due
process.” (more…)

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Hearing No. 34,965 – Successor Liability (Purchaser Liable for Sellers Audit Liability)

“On April 24, 1995, the Comptroller sent Petitioner a Texas Notice of Tax Due in the amount of $***********. The notice was based on successor liability due to the alleged acquisition of a business, *********** “DISTRIBUTING”), with outstanding sales tax liabilities. Petitioner requested a redetermination of the assessment which has resulted in this proceeding.” (more…)

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Buying an Existing Business

BUYING AN EXISTING BUSINESS – POLICY BROCHURE #98-117

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Sales Tax Reporting Requirements for Contractors

The Comptroller’s office was asked to provide a speaker to discuss the applicability of sales tax for plumbing contractors at the Buda headquarters of the Plumbing-Heating-Cooling Contractors Association of Texas. Jim Mathieson spoke to the association about reporting requirements under Rules 3.2913.3573.292 and 3.322.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1304.html#issue9.

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Direct Pay Permit Holders and “Tax-Included” Sales

Tax responsibilities can be confusing when a sale occurs between a seller and a direct pay permit holder, and the seller indicates that tax will be included as part of the sales price.

The Comptroller is considering amendments to appropriate rules to explicitly state that a seller who uses “tax-included” language in contracts and on invoices is responsible for remitting the tax to the Comptroller, without regard to who the purchaser is, consistent with longstanding law.

Additionally, if tax-included language is part of a contract when the purchaser holds a direct pay permit, the seller must remit the tax and cannot claim a refund if the direct pay permit holder also accrues and remits tax on the same transaction.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1304.html#issue8.

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Court Case Summary: Plush Toy Prizes Used to Stock Coin-Operated Amusement Crane Machines May Qualify for Resale Exemption

Roark Amusement & Vending, L.P. v. Combs, et al., Cause No. D-1-GN-06-004725

Roark Amusement & Vending, L.P. (Roark) owns and leases coin-operated amusement crane machines that customers operate to try to grab a toy prize. Roark filed a refund claim for Texas sales and use tax paid under protest on its purchases of plush toys used in its coin-operated amusement crane machines, arguing that the plush toy purchases qualified for the sale for resale exemption. (more…)

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Local Sales Tax Rate Increases – Calculating and Reporting Tax for Sellers Operating on a Cash Basis of Accounting

Businesses operating on the cash basis of accounting record all transactions in their books when money actually changes hands, meaning when payment is actually received by the company or when money is paid out by the company.

If your business operates or reports using the cash basis of accounting, and there is a change in the local tax rate between the time you execute a sales contract and payment is received, you should collect tax based on the rate in effect when the sales contract was executed, unless your contract allows for a change in the contract price based on a tax rate increase. Sales contracts must be dated and state a definite price and terms. (more…)

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Future Roundtable Discussion on Internet Hosting and Nexus

The Tax Policy Division will hold a roundtable discussion regarding House Bill 1841 (passed during the 82nd Legislature) and how the change in the law should impact our policies on Internet hosting and nexus. A date has not been set for the roundtable, but it will likely take place after the 83rd Legislature adjourns in June.

If you would like to be involved in the development of our future policies in this area by attending the roundtable meeting, please email Bryant Lomax.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1304.html#issue5.

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Franchise Tax Account Status

The Comptroller has historically issued Certificates of Account Status (“good standing”) in response to inquiries about the status of an entity’s franchise tax account. The ability to search the franchise tax status of an entity is also available on the Comptroller’s public website, Window on State Government.

In the past, being “in good standing,” or being able to obtain a Certificate of Account Status, meant that all franchise tax filing requirements had been met and no franchise tax was due. (more…)

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Future Roundtable Discussion on Cost of Goods Sold and the Printing Industry

The Tax Policy Division will hold a roundtable discussion regarding the cost of goods sold deduction and the printing industry. A date has not been set for the roundtable, but we are looking at the month of June.

If you would like to be involved in the development of our future policies in this area by attending the roundtable meeting, please email Teresa Bostick.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1304.html#issue2.

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State Tax Automated Research (STAR) System User Survey

Do you use our searchable STAR system to find information about Texas tax law and policies? We are currently evaluating STAR’s hardware and software components, and we’ve posted an online survey to learn more about how our customers use the system. We invite you to share your comments and observations through the survey. As always, we value your feedback.

If the link does not work, please copy and paste this address into your browser to take the survey.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1303.html#issue9.

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Spanish version of Fairs, Festivals, Markets and Shows

The Spanish version of Fairs, Festivals, Markets and Shows (Pub. 96-211) is now available online.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1303.html#issue6.

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