Get the Representation You Need from an Experienced Texas State Tax Controversy Lawyer
State tax law compliance is complex. It is also high-risk. Businesses and high-income individuals who are facing scrutiny from the Texas Comptroller can face both civil and criminal penalties—and findings of noncompliance can lead to additional scrutiny in the future. As a result, targeted businesses and individuals need to take a strategic and proactive approach to their defense, and this starts with engaging an experienced Texas state tax lawyer.
Our Texas state tax lawyers represent businesses and high-income individuals in high-stakes tax controversies statewide. This includes representing local businesses and Texas residents, as well as representing regional, national, and international businesses and individuals with real estate holdings in the state. Whether you are facing an audit or examination, your business is facing an adverse determination of tax liability, or you are facing any other issue with the Texas Comptroller, our team can assist—and we can do so on an emergency basis if necessary.
Matters We Handle
Our lawyers represent clients in all matters involving the Texas Comptroller and its contracted examiners. We also represent clients in litigation and appeals following adverse state tax liability determinations. Representative areas of our state tax practice include:
Audits and Examinations
The Texas Comptroller directly audits corporate and individual taxpayers and also relies on contracted examiners to help it uncover reporting and payment violations. Both types of scrutiny present similar risk, and while the Texas Comptroller selects some audit and examination targets at random, it also prioritizes enforcement for “Priority One Accounts,” which are the state’s largest taxpayers, and “prior productive accounts,” which are taxpayers who have previously faced audits or examinations resulting in the recovery of $25,000 or more.
Along with representing clients in standard audits and examinations, we represent clients in matters under the Texas Comptroller’s Managed Audit Program as well. If you have questions about pursuing a managed audit, a Texas state tax controversy lawyer at our firm can explain what you need to know.
Collection Actions
Similar to the Internal Revenue Service (IRS), the Texas Comptroller can—and does—pursue collection through various means. If your business is facing a state tax collection action (or if you personally are facing a collection action), our lawyers can intervene and work to protect your business (or you personally) by all means available. Depending on the circumstances, this may involve disputing the Texas Comptroller’s determination of tax liability, challenging the collection process or targeting a settlement that avoids formal means of enforcement.
Redeterminations and Administrative Hearings
For corporate and high-income individual taxpayers who dispute the Texas Comptroller’s determination of their liability, avoiding collection (and potentially civil or criminal penalties) typically begins with filing for redetermination. There are specific procedures that taxpayers need to follow, including submitting a compliant “Statement of Grounds” by the deadline specified in a taxpayer’s Audit Notification.
When seeking redetermination of their state tax liability, taxpayers also have the right to request an administrative hearing. Our lawyers have extensive experience helping clients pursue redeterminations, and we have the capabilities and resources required to effectively contest complex tax liability determinations at the administrative level.
District Court Tax Litigation
We also have the capabilities and resources required to effectively represent corporate and individual clients in district court tax litigation. If you are unable to secure a favorable resolution at the administrative level, going to court will generally be the next step. Our lawyers handle district court tax litigation involving all types of state tax, from litigation involving income tax to disputes involving taxes that apply specifically to companies involved in Texas’ oil and gas industry.
State Tax Appeals
Our lawyers represent clients in state tax appeals as well. If you are not able to obtain a satisfactory result at the administrative or trial level, you have the right to challenge the Texas Comptroller’s determination in Texas’ appellate courts. With that said, an appeal is not a “retrial,” but rather a proceeding focused on rectifying any issues that tainted the lower court proceedings. As a result, state tax appeals require legal counsel with specific experience helping clients achieve favorable results at the appellate level.
Common Issues in Texas State Tax Controversies
At all stages of enforcement and all levels of litigation, Texas state tax controversies can involve a wide range of substantive issues. The Texas Comptroller “oversee[s] 100 separate taxes, fees, assessments, and program[s],” and disputes involving any of these taxes, fees, assessments or programs can lead to high-stakes controversies.
Along with state income tax liability, other common issues in Texas state tax controversies include:
- Franchise Tax – Texas’ franchise tax applies to taxable entities doing business in the state. This includes corporations, partnerships and limited liability companies (LLCs) taxed at the entity level.
- Sales Tax – Along with the state’s 6.25 percent sales tax, the Texas Comptroller also enforces businesses’ obligations to collect and remit local sales taxes statewide.
- Energy-Related Taxes – Energy companies, including electricity companies and oil and gas companies, are required to pay several state and local taxes in Texas. Issues related to these taxes are a frequent source of complex and high-stakes disputes.
- Aircraft-Related Taxes – Sales and use taxes apply to transactions involving the sale of aircraft in Texas. If the seller does not have a Texas Sales and Use Tax Permit and pay the applicable sales tax upon closing, the purchaser must pay the applicable use tax, less any applicable credits for out-of-state taxes paid at the time of sale.
- Property Taxes – Businesses, permanent residents, and out-of-state landowners can all face contentious property tax disputes involving property valuations and other issues. Our Texas state tax lawyers regularly represent clients in these matters.
- Motor Vehicle and Fuel Taxes – Our lawyers regularly represent clients in matters involving Texas motor vehicle and fuel taxes as well. Here, too, this includes sales and use taxes triggered by vehicle sales, as well as taxes on fuel sold in the state.
- Oil and Gas Production Taxes – Texas’ crude oil production tax and natural gas production tax are determined based on the market value of the oil or gas that is subject to taxation. This can raise a variety of issues that are a frequent source of audits and examinations.
- Oil Well Servicing Taxes – Texas currently has a 2.42 percent tax on the gross charge for oil well servicing, “less the reasonable wellhead value of any material used or consumed in the well.” This tax, which applies to cementing, shooting, fracturing, acidizing, surveying and testing (among other services), is a frequent source of state tax controversies as well.
- Boat and Boat Motor Sales Taxes – Sales of boats and boat motors are subject to varying tax rates depending on the length of the vessel and other factors. Transactions involving large vessels can trigger significant tax liability, and the Texas Comptroller often prioritizes enforcement in these cases.
- Hotel Occupancy Taxes – State and local hotel occupancy taxes (HOTs) apply not only to hotels, but also to motels, bed and breakfasts, vacation rentals, and other properties. This is a frequent priority enforcement area as well, and property owners who are behind on their HOT payments must be prepared to defend themselves effectively.
Even these are just examples. Our lawyers handle all state tax matters on behalf of companies doing business in Texas and high-income individuals who are facing scrutiny from the Texas Comptroller. If you need experienced legal counsel for any state tax matter in Texas, we strongly encourage you to get in touch to discuss how we can help.
About Our Texas State Tax Lawyers
Brown, P.C. is a team of highly experienced Texas state tax lawyers who are committed to protecting our clients’ interests by all means available. Our lawyers have successfully represented numerous clients in multi-million-dollar tax controversies at the state and federal levels.
Our team is led by Partner and founding attorney Lawrence Brown. Mr. Brown has more than 35 years of experience, and his clients have included businesses in a wide range of industries as well as billionaires, professional athletes, renowned musicians, doctors, lawyers, and other professionals.
Along with Mr. Brown, our Senior Counsel, Cynthia Cook and Ashley Schieck, focus on handling complex and high-stakes state tax controversies at all stages—from audits to appeals. With decades of combined experience, our lawyers are more than comfortable handling state tax matters regardless of the stakes involved.
FAQs: Resolving State Tax Controversies with the Texas Comptroller
The Texas Comptroller has notified me of an upcoming audit. What should I do first?
If you have received an audit notice from the Texas Comptroller, you need to prioritize preparing for the audit. In Texas, state tax audits can pose significant risks—including risks not only for back tax liability with interest, but also for civil or criminal penalties.
Preparing for a state tax audit involves working quickly to discern the risks involved. Once you know what state auditors may find, then you can build your defense strategy accordingly. At Brown, P.C., we work with our clients to help them assess the risks involved in facing scrutiny from the Texas Comptroller, and then we work with state auditors on their behalf to steer the audit toward a favorable resolution. Whether this involves avoiding additional liability altogether, negotiating a settlement that mitigates the consequences of past mistakes, or preparing to pursue tax litigation will depend on the circumstances involved.
What is a “managed audit,” and should I request one?
A managed audit is “a review and analysis of invoices, checks, accounting records, or other documents or information to determine a taxpayer’s liability for tax under Texas Tax Code,” that is performed by a representative of the taxpayer instead of by auditors with the Texas Comptroller. Taxpayers who receive an audit notice from the Texas Comptroller have 30 days to request a managed audit, and it will make sense to submit a request in many cases.
If you have received an audit notice from the Texas Comptroller, a Texas state tax lawyer at our firm can help you assess your options and make an informed decision about how to proceed. If you decide to request a managed audit, our firm can prepare and submit the request on your behalf, and if approved, we can oversee the managed audit process.
A customer gave us an exemption certificate, but the auditor is still taxing the sale. Why?
If your company is facing a demand for tax despite receiving an exemption certificate from the customer, this most likely means that the Texas Comptroller has identified an issue with the exemption certificate. If the certificate is incomplete, inaccurate or expired, these are all issues that could lead to it being deemed invalid. In some cases, the Texas Comptroller will question the validity of exemption certificates for other reasons as well. You can contact us if you need to know more.
Can the state hold me personally liable for my company’s unpaid franchise taxes?
Yes, under Texas law, directors and officers can be held personally liable for their companies’ unpaid franchise taxes in some cases. If the Texas Comptroller is seeking to collect your company’s unpaid franchise taxes from you personally, we strongly recommend speaking with an experienced Texas state tax controversy lawyer right away.
If I disagree with the audit findings, do I have to pay the tax before I can fight it?
If you disagree with the Texas Comptroller’s determination of your (or your company’s) tax liability, you can fight this determination without prepaying by filing a petition for redetermination. Strict deadlines and other filing requirements apply; so, here too, it is important that you consult with an experienced Texas state tax lawyer as soon as possible.
Request a Confidential Consultation with a Texas State Tax Lawyer at Brown, P.C.
If you would like to speak with one of our lawyers about an impending audit, an unfavorable audit determination or any other state tax issue in Texas, we invite you to get in touch. To request a confidential consultation, call 888-870-0025 or inquire online today.