Sales Tax Audit Consultant in Texas
The grueling process of a Texas Tax Audit is finally over. But what happens if you do not agree with the outcome of the audit? On top of taxes, the Texas sales tax auditor also calculated penalties and interest, adding to the money you don’t believe is owed, or you cannot afford. Sometimes an overinflated assessment is a result of poor auditing techniques or you couldn’t produce records timely enough to prove the exempt nature of certain items. Other times a large assessment can result in the Texas auditor double-dipping or using bad periods for your business to predict other periods. Frequently, there is a disagreement as to whether your business is even selling taxable items or services. Fortunately, Texas sales tax attorneys, consultants, and other professionals can challenge the findings on your behalf.
Most Texas tax professionals out there do not deal with Texas sales taxes enough to really know the ins and outs of both the Texas tax laws and the administrative procedure of fighting an audit assessment. Sales Tax Helper primarily handles Texas state and local taxes and has mastered the ins and outs of the issues and the procedures that help reduce your assessment. As Texas state and local tax professionals, we challenge the Texas revenue agency and other state agencies on a regular basis. Our Texas sales tax consultants often assist with audits, protests, and resolving tax disputes at the administrative court level. Simply put, this is what we do every day.
Contact our offices for a FREE CONSULTATION with a consultant with experience in state and local tax matters. During our consultation, we will review your tax audit and discuss ways in which we can get you the results you are looking for. We regularly reduce the tax, penalties, and interest our clients are assessed. Whether you hire our firm or not, we offer a quick and honest evaluation for free so you can proceed as you deem fit.
Defend Your Rights at All Stages
AFTER THE AUDIT – the end of a Texas sales tax audit results in a sales and use tax audit report that lays out the auditor’s findings. If you cannot agree with the auditor on the findings, a Notice, such as a Notice of Determination, will be issued. Auditors are often trained to take a shotgun approach and the notice of field report or investigation can be alarmingly high.
It is not time to hit the panic button yet! The report along with audit findings gives you a detailed road map of what the auditor thinks is taxable and, if you know how to navigate the document, what you need to do to challenge the assessment. If you or your accountant have handled the audit to this point, now is the best time to bring in a consultant experienced in Tax Controversy for a free consultation and to help negotiate on your behalf with the auditor.
REQUEST TO EXTEND THE STATUTE OF LIMITATIONS – Even after the Texas sales tax auditor issues the audit report, the audit may not be over. A supervisor in Texas’s revenue agency may decide additional work needs to be done or additional transactions are subject to tax. During this time, the Statute of Limitation is running and the auditor may request an extension. You may be giving up valuable rights by agreeing to extend or waive the statute of limitations and you should consult with an expert before agreeing to waive any of your rights.
PROTEST THE AUDITOR’S ASSESSMENT – After the Texas sales tax audit and the audit report has been issued, the next step for the agency is to formally issue the auditor’s proposed or final assessment. Once issued, the assessment must be challenged within a short timeframe, usually 30-60 days. This is a critical deadline and you may give up important rights by not challenging the audit within this timeframe. If you have received a NOD and have not at least talked to someone experienced in Texas State and Local tax, now is definitely the time to do so.
CONSIDER MAKING AN OFFER TO SETTLE YOUR TAX LIABILITY – During the redetermination period, the agency will entertain offers to settle the case. Often, you can get better results here than with the auditor. If you or your Texas tax professional seldom do state and local tax work, it might be difficult to evaluate fair versus unreasonable settlements. DO NOT try to negotiate a settlement without an experienced Texas state and local tax lawyer or consultant.
FILE A FORMAL PROTEST WITH THE IN ADMINISTRATIVE OR TAX COURT – If you cannot get the case resolved with the agency, then you may have to file in the Administrative or Tax Court, which is habitually a more efficient way for taxpayers to avoid having to go the more expensive judicial court route. However, this is a court-like proceeding, and while not required, you really should have a Texas sales tax attorney or consultant handle the case.
CONTEST A JEOPARDY ASSESSMENT – Texas may issue a Notice of Jeopardy Determinations in certain situations. A jeopardy assessment gives the agency some accelerated rights that may include immediately beginning to try and collect. In this case, due to the jeopardy nature, the taxpayer only has 10 days to contest the assessment and must place a security deposit to fight the issue. You may, within the time allotment indicated on the notice, apply for an administrative hearing, but this does not stop collection activity.
OFFER IN COMPROMISE – Most state agencies allow offers in compromise (OIC). An offer in compromise is a different procedure as it usually requires a final tax liability and an offer to settle that liability for some lesser amount. To qualify for the OIC program, states usually have specific guidelines, such as:
- a closed account (i.e., liability outstanding);
- you are not disputing the liability in the agency or in court;
- you are not currently in bankruptcy; and
- you are unable to pay the full amount.
For most of these decisions, you do not need a state-licensed sales tax lawyer. You do need a sales tax professional who is well versed with state sales tax audits and knows how to deal with auditors. It is an art more than a science to know when to say no, when to sign, whether to provide the auditor documentation, where to host the auditor, and what is reasonable for the amount of time for the auditor to complete the audit. While most state tax attorneys have experience in federal tax, most do not have experience handling state sales tax matters. At Texas Sales Tax Helper, our sales tax consulting team has decades of experience working with state sales tax auditors. Not hiring someone who knows what they are doing can cost your business tens or even hundreds of thousands of dollars.
Texas Sales Tax Audit FAQs
You inadvertently waived a red flag or your company landed in the small percentage selected for a random Texas sales tax audit. These red flags include: cash-based businesses, prior audits that resulted in owed sales tax, your sales reported to the state didn’t match what you reported to IRS, a high volume of exempt sales, filing a refund claim, or a high number of credits. There’s also a possibility that your business happens to be in an industry that your state suspects rampant under-reporting. Often times, they will target industries effected by complex sales tax laws. Learn More
1. RESPOND to the notice
2. Get organized
3. Identify/Hire your audit manager
4. Notify your auditor of who they will be corresponding with
5. Compare your sales tax returns against the federal tax return
6. Test at least one month of exempt sales
7. Reconcile your sales tax payable account versus your sales tax payments
8. Review your fixed assets purchased, did you pay sales tax on them?
9. Review your purchases on your key expense accounts to ensure tax was paid on your purchases
10. Look at our complete list that explains these steps in more detail: here
Audit duration can vary dramatically from state to state and from business to business. Waiver issues aside, an audit generally takes 3-7 months to complete. Surprisingly, some audits can drag on for a few years. Time factors usually swing on the size of the company, the ability to produce reliable and organized documentation, and the level of sophistication of the business.
We all enjoy the occasional DIY project especially when it saves us money, am I right? Before opting to go that route, consider the risk vs. rewards involved. Avalara recently conducted a study and found that the average sales tax audit costs around $115,000. When facing a sales tax audit it is beneficial to have the expertise of the financial implications on your side. That is where Sales Tax Professionals such as SalesTaxHelper can save you a lot of heartache and money by avoiding a few missteps. Learn More
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