11 Questions to Ask Your Sales Tax Consultant
There is NO licensing or regulation of any type in Texas for Sales Tax Consulting companies. You should CAREFULLY investigate any company soliciting your business. To begin with, you should look at their website and identify the location of their office and the background and college degree (if any) of the owner and all consultants. Often owners and their consultants do not have an accounting degree (i.e., Red Flag). In addition, many of these less qualified consultants have a single ‘rent-a-room’ (virtual office) not located in your city.
These 11 simple questions below are meant to assist any business that is under audit and would like to hire a consultant. This guide is most helpful to those businesses located in and around Houston, Dallas, Austin and San Antonio (i.e., 80% of all audits occur in these four Texas cities). If you are located outside of these cities, we can still represent your business.
1. WHO IS THE OWNER AND DO THEY HAVE AN ACCOUNTING DEGREE (or any degree at all)?
Certain websites will not identify the owner (or the consultants). It is recommended to steer clear of these companies. If the owner is identified, then find out if they have an accounting degree. If the owner does not have an accounting degree, but has any other unrelated degree, then this should be a Red Flag because almost all audits involve the use of accounting skills. Note: It is a requirement for all Texas Comptroller auditors to have a 4-year accounting degree from an accredited university.
Dino Marcaccio, owner of Texas Tax Group (TTG), has an accounting degree from the Texas A&M University AND worked as a Sales/Use Tax auditor for 16 years at the Texas Comptroller’s Office.
2. IS THE OWNER AN EX-TEXAS COMPTROLLER SALES TAX AUDITOR?
There is no better experience than working as an auditor at the Comptroller’s Office to understand the audit process and to know what is and IS NOT subject to sales and/or use tax. Don’t be fooled by a ‘colorful’ sales brochure or a salesperson who avoids answering these questions. Find out the business background of the owner of the consulting firm that is asking to represent you. An owner that worked as a Texas Comptroller auditor is a better choice.
Dino Marcaccio, owner of Texas Tax Group (TTG), worked at the Texas Comptroller’s Office as a Sales Tax auditor for 16 years. Dino also hired 15 ex-auditors to work at his 4 offices (Houston, Dallas, Austin, San Antonio).
3. DOES THE COMPANY HIRE EX-TEXAS COMPTROLLER SALES TAX AUDITORS AS CONSULTANTS?
Ex-Texas Comptroller auditors are without a doubt the best consultants. Auditors will initially receive over 300 hours of intensive training during their first six months at the agency. They then receive approximately 75 hours of additional training each year. In addition, they will normally complete 25 to 30 sales tax audits per year. This equates to nearly 2,000 hours per year in agency training and actual field audit experience. There is absolutely no substitute for working as an auditor. This in-depth experience allows a person to become a much more effective sales/use tax consultant.
Texas Tax Group (TTG) has on staff over 15 ex-Texas Comptroller auditors (all with accounting degrees) who completed approximately 5,000 sales tax audits and worked at the Texas Comptroller’s Office for a combined total of over 350 years. No other firm contacting you has a staff with their combined experience.
4. DOES THE CONSULTANT HAVE OFFICES & CONSULTANTS IN HOUSTON, DALLAS, AUSTIN & SAN ANTONIO?
If your business is located in Houston, Dallas, Austin, San Antonio or surrounding areas, then you would want your consulting firm to have an office nearby. If the consultant does not have an office nearby, then how can they defend your audit? Worse yet, if they don’t have an office nearby, then it is very likely their consultant also does not live nearby. If the company says it has an office in your city, then you should ask if that office is a ‘rent-a-room’ (executive suite) office or a fully functioning office with the following:
- Separate locked office space to securely store client records (i.e., a one- room office won’t work)
- Separate locked office space for the consultants
- Separate office space for HOSTING the auditor
WARNING: Some questionable consultants will simply allow the auditors to take your hard copy or electronic records to their office (or their home if it is an outside State contractor auditor). This is not recommended. If you hire a consultant, you want your records protected, a pre-audit to be conducted and for the audit to be HOSTED in the consultant’s office. You are not required to surrender your records to be taken off-site by an auditor. It is also suggested that if you do not hire a representative, you request the audit take place at your place of business under your supervision.
If the consulting firm has only a single office, which is not located in your city or surrounding area, then that is a RED FLAG. How can any sales tax consulting firm effectively represent you if they DO NOT have an office or their consultants do not live in your surrounding area?
TTG has fully functioning offices in Houston, Dallas, Austin and San Antonio. Please refer to our website to view each office location. Each one of our offices has a secure client record storage area, consultant’s offices and auditor HOSTING stations. Our ex-auditor consultants conduct pre-audits and HOST auditors in our offices under their direct supervision.
NOTE: Your records DO NOT leave our consulting offices (unless certain approved activities need to take place at our client’s office locations).
5. WILL THE CONSULTANT PERFORM A ‘PRE-AUDIT’ PRIOR TO MEETING WITH THE AUDITOR?
A ‘Pre-Audit’ is a specific series of steps that should be taken by the consultant before meeting with the Texas Comptroller Auditor (i.e., Entrance Conference). These would include:
- Gross Sales Reconciliation (i.e., comparing all sources of client revenue to the gross sales reported by the client)
- Sales/Use Tax Reconciliation (i.e., comparing all sales taxes reported to sales taxes collected by the client)
- Resale/Exemption Certificates (i.e., obtaining ALL completed/signed certificates BEFORE the Entrance Conference date)
- Research Taxability of all Sales (i.e., research Tax Policy Letters, Statutes, Tax Rules and Administrative Hearing Decisions to determine the correct taxability of sales)
- Asset and Expense Purchase Review (i.e., identify and confirm tax paid on assets and expenses subject to tax)
For all clients, TTG requests 30-day extensions in order for our consultants to perform this 5-step ‘Pre-Audit’ process (as listed above). The pre-audit results will then be provided to the auditor at one of our offices under the direct supervision of one of our consultants. It is vital that certain pre-audit activities be conducted before the auditor arrives for the Entrance Conference. Many less qualified firms will simply hand over your records to the auditor. That will not happen with at TTG.
6. WILL THE CONSULTANT ‘HOST’ THE AUDITOR IN THEIR OFFICE AND SECURELY STORE RECORDS?
If you are located in Houston, Dallas, Austin, San Antonio or surrounding areas, you should ask your consultant if they have an office nearby to securely store records and HOST the audit. HOSTING the auditor is a vital part of the audit defense process. In most cases, you do not want the consultant and auditor to do their work in your office nor is it a good idea to simply allow auditors to take records to their offices. It should be noted that the average audit conducted without supervision by a qualified consultant can take 4 to 6 months.
Since most auditors have 20 to 25 active audits in progress, it is the job of the consultant to keep the audit moving. In addition, the consultant should also be the ‘gatekeeper’ and provide, after the pre-audit phase, only those client records that are relevant to the audit process. Although the consultant may not withhold records from the auditor, it is his/her job to initially review them and be sure that the auditor understands the content of the records presented (i.e., certain business accounting records have unique differences).
TTG has auditor HOSTING stations located in each of their 4 offices. HOSTING stations are used by the visiting auditor to conduct their work. Our ex-auditor consultants work directly with the assigned auditor to work towards an accurate audit.
7. DOES THE CONSULTANT HAVE FORMER TEXAS COMPTROLLER ‘TAX POLICY EXPERTS’ ON STAFF?
Over the last few decades, the Texas Comptroller’s Office has issued over 100,000 Tax Policy Letters, which are drafted by Tax Policy Experts who are considered the agency tax experts. These Letters are considered a leading source of Sales Tax authority and are relied upon to this day by auditors, business owners and even consultants, to determine correct taxability.
TTG has 4 former Texas Comptroller TAX POLICY EXPERTS (60 years total agency experience). Together, these 4 experts wrote over 5,000 Tax Policy Letters as well as performed other important agency functions which give TTG a leading position when it comes to Texas taxes. Full BIO information can be found on TTG’s website for their Tax Policy Experts: Gilbert Zamora – CPA (retired), John Fitzgibbons – CPA, Glenda Aguirre and George Aguirre.
8. DOES THE CONSULTANT HAVE ‘PROFESSIONAL LIABILITY INSURANCE?
Ask the consulting firm if they have what is called ‘Professional Liability Insurance’ (‘Errors and Omissions’ – E&O). These policies help protect a client if a consulting firm has committed some form of negligence related to the audit. Be sure to ask if the policy is ‘active’ and how much coverage does it provide. Don’t be afraid to ask for a copy. These policies will award damages if the consultant causes damages to their client.
Some consulting firms operate under a ‘shell’ corporation that has no assets in case they are sued, or worse, there is no corporate entity and the owner is operating as a sole owner with no business liability insurance. Be sure to ask about the ENTITY you are signing a contract with. If your consultant causes you to be over-taxed or even lose your business, you must know that you have legal recourse through professional liability insurance.
TTG has a $5,000,000 ‘Professional Liability Insurance’ (‘Errors and Omissions’ – E&O) which covers both the entity ‘Texas Tax Group, Inc.’ as well as all consultants individually. TTG has this policy CONTINOUSLY in place since the company was formed in 2007 and has never had a claim on this policy. TTG also has an A+ Rating with the BBC since 2007.
9. DOES THE CONSULTANT HAVE ‘IARC’ INDEPENDENT AUDIT REVIEW CONFERENCE EXPERIENCE?
Ask the consultant how many IARC (Independent Audit Review Conferences) do they attend each year. Experience matters. An IARC is a type of ‘pre-hearing’ that takes place BEFORE the tax bill is issued. This informal hearing is led by a Texas Comptroller Dispute Officer who reviews all research presented and listens to both sides of oral arguments. The consultant should have conducted extensive tax research and prepared written arguments and exhibits to present at the IARC. If the IARC decision is in the business’ favor, then the auditor must remove any contested items.
Many inexperienced consultants LOSE their chance to request an IARC because they simply did not RESERVE their right in writing. When this happens, the auditor is allowed to process and bill the audit, leaving only a costly and lengthy Administrative Hearing process remaining.
TTG has prepared for and attended over 75 IARC’s since 2007. TTG has had conferences with all 3 Dispute Conference Officers and met personally with current and past IARC Agency Directors to discuss procedural concerns. TTG has also HOSTED several of these Conferences at their Houston and Dallas offices because they have advanced audio/visual systems for each side to present tax research and client documentation.
10. DOES THE CONSULTANT HAVE ADMINISTRATIVE HEARING EXPERIENCE?
Ask the consultant how many Administrative Hearings have they been involved with on a yearly basis. Again, experience matters. For instance, once the Hearing is granted, the consultant must prepare ALL documents (client records and tax research) that is needed within 60 Days of the Hearing approval date. The consultant must then be prepared to meet with the auditor and present all supporting documents and attempt to resolve all audit issues.
Many consultants do little to nothing to prepare for this important ‘60 Day Period’ auditor meeting, which means that the audit will then be transferred to an aggressive Texas Comptroller Hearings Attorney, allowing for the best chance to resolve the audit to be lost. Once a hearing attorney is assigned, that person will issue what is called a Position Letter (i.e., detailed legal arguments). The consultant must file a REPLY to the Position Letter within 45 days, countering any position(s) taken by the hearings attorney. If this REPLY is not timely filed, the hearing can be cancelled and the total audit liability could be due immediately.
If the REPLY to the Position Letter is timely filed, then the hearings attorney can also issue requests for additional records or possibly Interrogatories and/or Admissions and Denials.
If you get that far, then you must prepare for the actual trial and submit numbered exhibits, additional legal arguments and witness lists. The hearing (trial) itself can also be intimidating because certain rules must be followed regarding the questioning of witnesses (i.e., your consultant must prepare you or other witnesses to be sworn in and to answer specific questions). Your consultant must also be prepared to question (under oath) the agency’s auditor or other subject matter experts presented by the agency. If your consultant is not familiar with all aspects of your case and doesn’t present an overwhelming amount of supporting evidence and testimony, then you could easily lose your case. If that happens, there is no alternative except to either pay the entire audit liability or close the business. In certain cases, the audit liability can be assessed against the business owner individually.
Since 2007, TTG has been involved with over 100 ‘oral’ or ‘written submissions’ Administrative Hearings. TTG has its own Director of Administrative Hearings (JEFF JANSEN – Attorney). TTG is one of the leading consulting firms for the number of Sales Tax Administrative Hearings filed by a single firm from 2013-2016.
Knowledge of the tax rules, audit methodology and the hearings process are vital to winning a case. As auditors and consultants, TTG has been involved with over 7,000 audits and have a total combined 450 years of agency and consulting Texas Sales/Use Tax experience. Don’t hire an inexperienced firm to represent you in the time consuming and complex Administrative Hearings process.
11. DOES THE CONSULTANT HAVE EXPERIENCE WITH ‘SETTLEMENT & COMPROMISE AGREEMENTS?
Ask your consultant if they are familiar with how to obtain an interest-free payment plan or else possibly waive some or all the penalties applied to your audit. Settlement agreements are not easy to obtain and many actions must be taken to obtain them. To begin with, an Administrative Hearing must be correctly filed for and granted. If the hearing is denied for lack of legal grounds (i.e., contentions), then additional penalties and interest will be applied and the entire audit assessment will be due at once. Failure to pay can result in cancellation of the sales/use tax permit and possible closing of the business and seizure of all assets. If the hearing is granted, then the consultant must negotiate on behalf of the client and present various arguments to obtain a settlement.
Settlements are not guaranteed, and if not granted, then the Comptroller will continue to take various collections actions until the entire audit liability is paid. The Enforcement Division of the Texas Comptroller’s Office is very AGGRESSIVE and will seek to close any business not paying an audit assessment owed. In addition, operating without a sales tax permit can result in large fines by the agency against the business owner.
Since 2007, TTG has obtained over 230 ‘interest-free payment plans’ for clients as well as waived penalties in over 200 audits. TTG’s Settlement Coordinator (Margie Merwin) is personally involved with each settlement and can answer any questions you may have about this complex process. In all cases, it is required to file a correct Request for Administrative Hearing and then continue to negotiate with the agency, often for 2 months or more, to secure a favorable settlement. In August of 2017, TTG hired Nancy Meyer, Assistant Settlement Coordinator, to assist Ms. Merwin with the large caseload of settlements. TTG files for more administrative hearings and obtains more settlements than any other firm in Texas.
Deciding which consulting firm to hire is an important decision. Take your time. Do your homework.
VISIT WEBSITES OR OFFICES. If needed, talk to the owner of the consulting firm and their consultants and ask these specific 11 questions listed above. And then make your choice.
TTG hopes you will allow them to represent you with your audit. If your office is in Houston, Dallas, Austin, San Antonio or surrounding areas, you can be assured that they have a fully functioning office in your area, staffed by consultants who worked as Texas Comptroller auditors. Thank you.