Experienced Legal Representation for Texas State Tax Audits
Our firm represents companies nationwide in Texas sales tax audits. These audits can present risks for significant liability exposure, so an informed and strategic defense is critical.
We handle sales tax audits as part of our Texas state tax audits practice. Each lawyer at our firm has extensive experience representing clients in these matters, and, as with all matters we handle, we take a proactive approach focused on helping our clients avoid unnecessary liability by all means available.
Common Issues in Texas Sales Tax Audits
While sales tax audits can involve a variety of issues, the Texas Comptroller tends to prioritize certain issues more than others. For example, common issues in Texas sales tax audits include:
“Nexus” with the State of Texas
A significant portion of our sales tax audit representation involves assisting out-of-state companies that are facing sales tax liability based on their claimed “nexus” with the State of Texas. Under the U.S. Supreme Court’s landmark decision in South Dakota v. Wayfair, Inc. (2018), states can impose sales tax liability on companies that do not maintain a physical in-state presence but nonetheless have a sufficient connection, or “nexus,” with the state as a result of selling to in-state customers.
However, “nexus” determinations are not always (or even often) straightforward, and out-of-state companies can—and do—face claims for state sales tax liability when no such liability is warranted. If your company needs to dispute the Texas Comptroller’s claim of “nexus,” our lawyers can help.
Issues with Exemption Certificates
Issues with exemption certificates can trigger sales tax audits in some cases as well. If your company was relying on an exemption certificate to avoid paying sales tax and the validity of this certificate is now in dispute, our lawyers can help in this scenario as well.
Determining State Sales and Use Tax Liability
We also represent companies in audits focused on determining their sales and use tax liability. If the Texas Comptroller is preparing to scrutinize your company’s sales and use tax remittances, our lawyers can intervene and work to steer the audit toward a favorable resolution.
What To Do if You Receive an Audit Notice from the Texas Comptroller
If your company has received a sales tax audit notice from the Texas Comptroller, there are some important steps you should take promptly. These steps include (but are not limited to):
- Engage Experienced Tax Defense Counsel – Due to the complexity of these audits and the risks involved, engaging experienced tax defense counsel is essential.
- Preserve All Relevant Records – Failing to preserve relevant records can both raise red flags and increase the risks involved in facing a Texas sales tax audit.
- Conduct a Comprehensive Risk Assessment – Conducting a comprehensive risk assessment will be critical for determining your company’s exposure and executing an informed defense.
How Our Texas Tax Lawyers Can Help
Our lawyers rely on decades of experience to protect our clients’ financial interests during Texas sales tax audits. If your company is facing an audit, here are just some of the ways our lawyers can help:
- Preparing for the Audit – From preserving relevant records to conducting a comprehensive risk assessment and building an informed defense strategy, we can help your company thoroughly prepare for the impending audit.
- Providing Representation During the Audit – Our lawyers can communicate directly with the Texas Comptroller’s auditors throughout the process while working with you and your company’s other key stakeholders behind the scenes.
- Challenging the Outcome of the Audit if Necessary – Along with fighting to secure a favorable outcome, our lawyers will also document any issues that arise during the audit process so that we are prepared to challenge the outcome of the audit if necessary.
FAQs: Facing a Sales Tax Audit in Texas
Why was my business selected for a sales tax audit?
The Texas Comptroller selects businesses to audit through various means. While it selects sales tax audit targets at random, it also selects targets based on their size, audit history and other factors. Referrals from other agencies and leads submitted by members of the public can trigger sales tax audits as well.
How far back can the state look into my sales tax records?
Businesses are required to retain sales and use tax records for four years under Texas law. As the Texas Comptroller explains, “[t]his applies to all records that pertain to transactions involving sales or use tax liability.”
What is “sampling” and why is it a risk for my business?
“Sampling” refers to an auditing practice that involves examining a subset of a business’s tax records and substantiating documentation. It can be risky because it can provide an inaccurate picture of a business’s overall compliance record. This is particularly true when the Texas Comptroller chooses to use sampling due to the complexity or volume of a business’s sales tax records.
I received a “Notification of Audit Results.” Is it too late to hire a lawyer?
No, if you have received a “Notification of Audit Results” from the Texas Comptroller, it is not too late to hire a lawyer. Businesses can challenge unfavorable sales tax audit determinations on various grounds, and they can do so both at the administrative level and in the Texas state court, if necessary.
Why hire a tax attorney instead of a CPA?
Texas sales tax audits can involve a variety of complex legal issues, so working with an experienced tax attorney is essential. Additionally, if your company’s accountant made mistakes (or arguably made mistakes) that led to underpayment of your company’s sales tax liability, your company’s interests could be adverse to those of your company’s accountant.
Discuss Your Company’s Texas Sales Tax Audit with an Experienced Lawyer in Confidence
If you would like more information about our firm’s experience handling Texas sales tax audits or sales tax audit appeals, we invite you to get in touch. To request a confidential consultation with an experienced Texas tax lawyer at Brown, P.C., please call 888-870-0025 or contact us confidentially online today.