Why am I Being Audited?

You just received notification that your business has been selected for a Texas Comptroller state tax examination. Unless you have been through the audit process before, you probably have lots of questions and concerns. Of course one of the first questions most business owners ask is, “Why my business?” Although it’s common to think you did something wrong, this usually isn’t the case. However, if you have been selected for audit, Texas Tax Group has a team of 15 former Texas Comptroller State Tax Auditors who can help you save time and money. (more…)

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“Estimated” Sales Tax Audit

This client owns a bar that does not serve food. The bar had not been remodeled in years, and the only real tax exposure for the state was in the mixed beverage area. However, there are some overly zealous audit supervisors who insist their auditors spin off sales tax audits “in order to protect the state’s interest.” The client did not initially provide any records related to the sales tax audit, so the auditor “estimated” the sales tax audit. (more…)

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A Practical Guide to HB 3572

The 83rd Legislative Session passed House Bill 3572, which impacts all Mixed Beverage Tax permit holders in the state. It increases the overall tax rate paid to the state to 14.95%. The law takes effect beginning on January 1, 2014. This law does the following things:

1) It reduces the Mixed Beverage Gross Receipts Tax rate from the current 14% to 6.7%.
2) It creates a new tax known as the Mixed Beverage Sales Tax (MBST). The rate of this tax is 8.25%. However, this tax is NOT the same as the current Sales Tax and needs to be accounted for and reported separately.
3) You will need to choose how to account and report this new tax: Tax Included or Separate line item showing the tax.
4) It increases your reporting responsibilities.
5) It increases your documentation responsibilities. (more…)

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Audit Division and the Fraud Penalty

In the theoretical world, the Texas Comptroller’s Audit Division serves several very real and legitimate purposes. Good state tax auditors conduct audits for tax compliance (as opposed to revenue generation).  Another purpose is to keep the playing field level for all taxpayers.

It is not right for business A to comply with the law while business B, a competitor of business A, ignores it or intentionally violates it.  When businesses choose or intend to violate the tax laws, the Texas Comptroller’s Audit Division has the option and the responsibility to punish the violator via the additional 50% penalty, also known as the Fraud Penalty. (more…)

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An Open Letter to All Mixed Beverage Permit Holders in the State of Texas

Beginning October 1, 2012, Audit Division of the Comptroller’s Office very quietly and without notice changed their policy related to Mixed Beverage audits. The policy change almost guarantees that if you are selected for audit, you will be assessed a liability.

No matter how good the records, internal controls or adherence to the law, any Mixed Beverage audit is by its very nature an estimation. Since the inception of the tax in the 1970’s, the estimation procedure has employed the depletion methodology. In an effort to be fair and in recognition that any estimation is imperfect, first the TABC and currently the Audit Division of the Comptroller’s Office used to compare what the taxpayer reported to the amount they estimated the taxpayer “should have” reported. If a taxpayer with good records had reported within 7.5% of what the auditor estimated, no liability was assessed. If the taxpayer had bad records, the “close enough” amount was 5%. (more…)

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