34 TAC §3.282
The Comptroller of Public Accounts proposes an amendment
to §3.282, concerning auditing taxpayer records. The amendment adds subsections
that set out guidelines for managed audits by taxpayers, a percentage-based
optional reporting method, and the determination of overpaid amounts, as authorized
by Senate Bill 1319, 76th Legislature, 1999, effective October 1, 1999. Subsection
(h)(4) is added and refers the reader to Tax Code, §111.064 and §3.325
of this title (relating to Refunds, Interest, and Payments Under Protest),
for interest paid by the state on tax paid in error. The amendment defines
managed audit and percentage-based reporting method, and as a result of this
additional information, several subsections are renumbered.
Mike Reissig, Director of Estimates, 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 local government.
Mr. Reissig 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 in providing new information regarding tax responsibilities.
This rule is adopted under the 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.
This amendment is proposed under the Tax Code, §111.002,
which provides the comptroller with the authority to prescribe, adopt, and
enforce rules relating to the administration and enforcement of the provisions
of the Tax Code, Title 2.
The amendment implements the Tax Code, §§151.022 -1 51.026, 151.0231,
151.054, 151.4171, 151.430, 151.504, 151.515, and 111.004 - 111.0042.
§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)
[
(a)
] Taxpayer accounts may be audited
by authorized representatives of the comptroller at any time during regular
business hours at the discretion of the comptroller or the comptroller's authorized
agent or representative.
(c)
[
(b)
] 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)
[
(c)
] 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)
[
(d)
] 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.
(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 holding 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 holding 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).
(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 claiming a credit or submitting 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)
[
(e)
] 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)
[
(f)
] 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 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)
[
(g)
] 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)
[
(h)
] 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 March 6, 2000.
TRD-200001692
Martin Cherry
Special Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: April 16, 2000
For further information, please call: (512) 463-3699