34 TAC §3.282
The Comptroller of Public Accounts proposes an amendment
to §3.282, concerning auditing taxpayer records. This section
is amended to implement provisions of House Bill 3319, 80th Legislature,
2007, and Senate Bill 1, 82nd Legislature, First Called Session, 2011.
House Bill 3319, 80th Legislature, 2007, repealed Tax Code, §151.0232,
relating to the CPA audit program. To implement this statute, subsections
(a)(1) and (g) of the current rule are deleted, and the following
subsections are relettered accordingly.
Subsection (f)(7) is amended to add a cross-reference to §3.325
of this title (relating to Refunds and Payments Under Protest).
Subsection (i), formerly subsection (j), is amended to implement
Senate Bill 1, 82nd Legislature, First Called Session, 2011, and state
that a taxpayer claiming a refund or credit is required to keep contemporaneous
documentation to substantiate the refund or credit for a minimum of
four years and longer in some circumstances.
John Heleman, Chief Revenue Estimator, has determined that for
the first five-year period the rule will be in effect, there will
be no significant revenue impact on the state or units of local government.
Mr. Heleman also has determined that for each year of the first
five years the rule is in effect, the public benefit anticipated as
a result of enforcing the rule will be by clarifying for taxpayers
the agency's auditing policy. This rule is proposed under Tax Code,
Title 2, and does not require a statement of fiscal implications for
small businesses. There is no significant anticipated economic cost
to individuals who are required to comply with the proposed rule.
Comments on the proposal may be submitted to Bryant K. Lomax, Manager,
Tax Policy Division, P.O. Box 13528, Austin, Texas 78711. Comments
must be received no later than 30 days from the date of publication
of the proposal in the
Texas Register.
The amendment is proposed under Tax Code, §111.002
and §111.0022, which provide the comptroller with the authority
to prescribe, adopt, and enforce rules relating to the administration
and enforcement of the provisions of Tax Code, Title 2, as well as
taxes, fees, or other charges which the comptroller administers under
other law.
The amendment implements Tax Code, §111.0041.
§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)
Certified Public Accountant (CPA)
Audit Program--A program that the comptroller creates under Tax Code, §151.0232,
in which a taxpayer may hire a certified public accountant who is
not employed by the comptroller to perform a sales and use tax audit
to determine a taxpayer's liability under Tax Code, Chapter 151.]
(1)
[
(2)
] 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)
[
(3)
] 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)
[
(h)
] 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
[
taxpayer
]:
(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
taxpayers who meet certain requirements to participate in the CPA
Audit Program. For more information, see §3.368 of this title
(relating to Certified Public Accountant (CPA) Audit Program).]
(g)
[
(h)
] 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)
[
(i)
] 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)
[
(j)
] 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[
, (relating to Refunds,
Interest, and Payments Under Protest)
].
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 [
(relating to Refunds, Interest, and Payments Under
Protest)
] and Tax Code, §111.064.
(j)
[
(k)
] 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)
[
(l)
] 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 60 days 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 upon the filing of a petition for redetermination
or claim for refund. 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. If the seller is
not in possession of the certificates within 60 days from the date
written notice is given by the comptroller that certificates pertaining
to periods or transactions specified in the notice are required, any
deductions claimed which require resale or exemption certificates
will be disallowed. Exemptions claimed by those certificates acquired
during this 60-day period will be subject to independent verification
by the comptroller before the deductions will be allowed. Certificates
delivered after the 60-day period will not be accepted. See §3.285
of this title (relating to
Resale Certificate;
Sales for
Resale[
; Resale Certificate
]); §3.287 of this title
(relating to Exemption Certificates); and §3.288 of this title
(relating to Direct Payment Procedures and Qualifications).
(3)
When a 60-day letter 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)
[
(m)
] 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)
[
(n)
] The comptroller may
proceed against either the seller or purchaser, or against both, until
the tax, penalty, and interest have been paid.
This agency hereby certifies that the proposal has
been reviewed by legal counsel and found to be within the agency's
legal authority to adopt.
Filed with the Office
of the Secretary of State on April 22, 2013.
TRD-201301614
Ashley Harden
General Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: June 9, 2013
For further information, please call: (512) 475-0387