34 Tex. Admin. Code § 3.282 - Auditing Taxpayer Records
(a) The
following words and terms, when used in this section, shall have the following
meanings, unless the context clearly indicates otherwise.
(1) Managed audit--A taxpayer self-review and
analysis of invoices, checks, accounting records, or other documents or
information to determine a taxpayer's liability for tax under Tax Code, Chapter
151, as allowed under a written agreement with the comptroller authorizing a
managed audit as described in subsection (f) of this section.
(2) Percentage-based reporting method--A
method by which a direct payment permit holder may be authorized to categorize
purchase transactions according to standards specified in a letter of
authorization issued under the provisions set out in subsection (g) of this
section, reviews an agreed-on sample of invoices in those categories to
determine the percentage of taxable transactions, and uses that percentage to
calculate the amount of tax to be reported.
(b) The comptroller or an authorized
representative of the comptroller may audit a taxpayer's accounts and records
at any time during regular business hours at the discretion of the comptroller
or the comptroller's authorized agent or representative.
(c) The comptroller may use a detailed
auditing procedure or a sample and projection auditing method to determine tax
liability. Sampling procedure may include manual sampling techniques and
computer-assisted audit techniques, whichever produce the most accurate results
in the most efficient manner.
(d) A
sample and projection auditing method is appropriate if:
(1) the taxpayer's records are so detailed,
complex, or voluminous that an audit of all detailed records would be
unreasonable or impractical;
(2)
the taxpayer's records are inadequate or insufficient, so that a competent
audit for the period in question is not otherwise possible; or
(3) the cost of an audit of all detailed
records to the taxpayer or to the state will be unreasonable in relation to the
benefits derived, and sampling procedures will produce a reasonable
result.
(e) Before using
a sample technique to establish a tax liability, the comptroller must notify
the taxpayer in writing of the sampling procedure to be used.
(f) The comptroller may authorize taxpayers
that meet certain requirements to perform managed audits.
(1) A taxpayer who wishes to participate in a
managed audit must request authorization from the comptroller's office to
conduct a managed audit under this section. Authorization will only be granted
as part of a written agreement between the taxpayer and the comptroller's
office. The agreement must:
(A) be signed by
an authorized representative of the comptroller and the taxpayer; and
(B) specify the period to be audited and the
procedure to be followed.
(2) In determining whether to authorize a
managed audit, the comptroller may consider, in addition to other factors the
comptroller considers relevant:
(A) the
taxpayer's history of tax compliance, including:
(i) timely filing of all reports;
(ii) timely payment of all taxes and fees due
the state;
(iii) prior audit
history;
(iv) delinquency in other
taxes;
(v) correction of problems
identified;
(vi) collection of tax
that was not remitted; and
(vii)
whether a penalty waiver had been denied on prior occasions and the reason for
denial;
(B) the amount
of time and resources the taxpayer has available to dedicate to the
audit;
(C) the extent,
availability, and completeness of the taxpayer's records for the period to be
covered by the managed audit;
(D)
the taxpayer's ability to pay any expected liability; and
(E) the size and sophistication of the
taxpayer.
(3) The
decision to authorize or not authorize a managed audit rests solely with the
comptroller.
(4) A managed audit
may be limited to certain categories of liability under Tax Code, Chapter 151,
including tax on:
(A) sales of one or more
types of taxable items;
(B)
purchases of assets;
(C) purchases
of expense items;
(D) purchases
under a direct payment permit; or
(E) any other category specified in an
agreement authorized by this section.
(5) Before the audit is finalized, the
comptroller may examine records that the comptroller determines are necessary
to verify the results.
(6) Unless
the audit or information reviewed by the comptroller under this subsection
discloses fraud or willful evasion of the tax, the comptroller may not assess a
penalty and may waive all or part of the interest that would otherwise accrue
on any amount identified to be due in a managed audit. This subsection does not
apply to any amount collected by the taxpayer that was a tax or represented to
be a tax but was not remitted to this state.
(7) Except as provided by applicable law, the
taxpayer is entitled to a refund of any tax overpayment disclosed by a managed
audit. See §
3.325 of this title (relating to
Refunds and Payments Under Protest).
(g) The comptroller may authorize direct
payment permit holders that meet certain requirements to report tax on
purchases using a percentage-based reporting method.
(1) A holder of a direct payment permit may
request authorization from the comptroller to use a percentage-based reporting
method. The authorized percentage must be used for a three-year period
specified by the comptroller, unless the authorization is revoked by the
comptroller.
(2) The authorization
to report under this subsection may be revoked if the comptroller determines
that the percentage being used is no longer representative because of a change
in the taxpayer's business operations or in law, including a change in the
interpretation of a law or rule. For example, two decisions from the Court of
Appeals changed the list of items that may be purchased tax free by
manufacturers. Subsequently the legislature passed two bills that significantly
changed the tax responsibilities of manufacturers. Each of these changes
affected a manufacturer's percentage used to report taxable
purchases.
(3) The decision of the
comptroller to deny or revoke authorization under this section is not subject
to appeal.
(4) When authorizing
reporting under this section, the comptroller may categorize transactions by
dollar amount, by type of taxable item purchased, by the purpose for which the
taxable item will be used, or by other standards appropriate to the taxpayer's
operations.
(h) A
taxpayer who holds a permit issued under Tax Code, Chapter 151, who has paid
Texas tax in error on purchases of taxable items, whether sales tax was
remitted directly to this state or to a retailer holding a permit under Tax
Code, Chapter 151, may compute the amount of overpayment by use of a projection
based on a sampling of transactions.
(1) The
sampling method must be one that has been approved by the
comptroller.
(2) The taxpayer must
record the method by which the projection and computation were performed and
must make available, on request by the comptroller, information explaining the
method employed and the records on which the projection and computation were
based.
(i) A taxpayer
who holds a permit issued under Tax Code, Chapter 151, may obtain reimbursement
for amounts determined to have been overpaid by taking a credit on one or more
sales tax returns or by filing a claim for refund with the comptroller within
the limitation period specified by Tax Code, Chapter 111. See §
3.325 of this title. A taxpayer is
required to keep contemporaneous records to substantiate and enable
verification of the taxpayer's credit or refund claim for a minimum of four
years from the date on which the record is made, and throughout any period in
which any tax, penalty, or interest may be assessed, collected, or refunded by
the comptroller, or in which an administrative hearing or judicial proceeding
is pending, unless the comptroller authorizes in writing a shorter retention
period.
(1) A taxpayer may take a credit by
amending the sales tax return for the period in which the tax was originally
paid.
(2) If a taxpayer chooses to
take the credit by claiming a refund, the claim must identify the period in
which the tax was originally paid.
(3) A taxpayer who claims a credit or submits
a refund request for local taxes must identify the period in which the local
tax was paid and the local taxing jurisdiction to which the local tax was
reported.
(4) Interest will be paid
on tax amounts found to be erroneously paid for reports due on or after January
1, 2000, whether claimed on a request for refund or claimed in an audit. See
also §
3.325 of this title and Tax Code,
§
111.064.
(j) If records are inadequate to
accurately reflect the business operations of the taxpayer, the auditor will
determine the best information available and base the audit report on that
information. See §
3.281 of this title (relating to
Records Required; Information Required) for information on proper
records.
(k) Resale and exemption
certificates.
(1) Resale and exemption
certificates should be available at the time of the audit. All certificates
obtained on or after the date the comptroller's auditor actually begins work on
the audit at the seller's place of business or on the seller's records after
the entrance conference are subject to verification. All incomplete
certificates will be disallowed regardless of when they were
obtained.
(2) The seller has 90
days, or until a later date agreed to in writing by the comptroller and the
seller, referred to in this section as "the period," from the date written
notice is received by the seller from the comptroller in which to deliver the
certificates to the comptroller. Written notice shall be given by the
comptroller no earlier than the filing of a petition for redetermination or
claim for refund.
(3) For the
purposes of this section, written notice given by mail is presumed to have been
received by the seller within three business days from the date of deposit in
the custody of the United States Postal Service. The seller may overcome the
presumption by submitting proof from the United States Postal Service or by
other competent evidence showing a later delivery date.
(4) If the seller is not in possession of the
certificates by the end of the period, any deductions claimed which require
resale or exemption certificates will be disallowed. Exemptions claimed by
those certificates acquired during the period will be subject to independent
verification by the comptroller before the deductions will be
allowed.
(5) Certificates delivered
after the period will not be accepted. See §
3.285 of this title (relating to
Resale Certificate; Sales for Resale); §
3.286 of this title (relating to
Seller's and Purchaser's Responsibilities); §
3.287 of this title (relating to
Exemption Certificates); and §
3.288 of this title (relating to
Direct Payment Procedures and Qualifications).
(6) When written notice has been received, a
resale or exemption certificate is the only acceptable proof that a taxable
item was purchased for resale or qualifies for exemption.
(l) Both sellers and purchasers are subject
to audit and assessment of tax on any transactions on which tax was due but has
not been paid.
(m) The comptroller
may proceed against either the seller or purchaser, or against both, until the
tax, penalty, and interest have been paid.
Notes
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