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December 29, 2017


The out-of-state offices of Texas Comptroller auditors

It might come as a surprise, but the Texas Comptroller maintains audit offices in several other states. Remote locations are in Los Angeles, New York City and Tulsa. Why are the auditors on the move?

This is all part of an effort to collect unreported sales and use tax revenue for the state coffers. Field auditors are able to conduct business audits in these other states. They also focus on implementing programs that improve tax compliance.

Increasing focus on collections and information sharing

During the Great Recession, many states increased the number of audits to uncover unpaid tax revenue. Often the target has become businesses based in other states.

States often work together and have regional information-sharing agreements. Texas is a part of the Western States Association of Tax Administration.

For Texas state tax purposes what constitutes a nexus?

One of the main issues that these out-of-state auditors deal with is determining whether a company headquartered in another state may have a sufficient nexus to trigger a tax obligation. For Texas to require a business to collect state sales tax, the business must have a physical presence in Texas. What exactly does this mean?

There are some clear-cut examples. These include a business with any of the following:

  • Office or distribution center within the state
  • Employees or independent contractors based in the state
  • Property within the state whether owned or leased

Nexus status for internet-based retailers has been hotly debated for many years and can become a more tricky analysis.

How are unregistered business selected for an audit? It is often a random sampling. In other circumstances, there may be evidence or a tip that tends to suggest a business might owe Texas taxes.

If your business is the subject of a Texas Comptroller audit into tax collection practices, it is critical to discuss your situation with a tax attorney. Bringing in an experienced attorney right away can mitigate exposure to significant liability and result in a swifter resolution.