A retailer's computerized point-of-sale system calculates a sales tax amount that differs from what's actually collected from customers. Can the Comptroller approve reporting sales tax based on the actual amount collected instead of the statutory calculation?

Plain-English summary

A retailer asked the Comptroller to approve a reporting method based on the actual sales tax collected by its computerized system, which calculated a different amount from what Tex. Tax Code § 151.053(a) would produce.

The Comptroller declined: § 151.053(a) requires the tax to be computed on the sales price by multiplying the tax rate against the sale amount, with any resulting fraction of a cent less than one-half cent dropped and any fraction of one-half cent or more rounded up to a full cent. Critically, the tax is computed on the total sale of taxable items, not on each individual item separately — rounding off tax due item-by-item is prohibited. The Comptroller cannot approve a reporting method that departs from this statutory formula.

Practically: if the retailer's system properly follows § 151.053(a), no reporting of any resulting over-collection is required. But if the system's calculation collects less than what's due on the total taxable receipts, the retailer must still remit the full amount due on those total receipts — regardless of what its own system actually collected from customers. The letter notes that if a database properly implements § 151.053(a), any gap between collected and remitted amounts should be small; a large discrepancy likely signals a calculation error.

What this means for you

Retailers with point-of-sale or e-commerce systems that calculate sales tax

Configure your system to compute tax on the total taxable sale amount under § 151.053(a)'s rounding rule (round up at one-half cent or more, drop below it), not item-by-item. You cannot get Comptroller sign-off to remit only what your system happens to collect if that falls short of the statutory calculation on total receipts.

Accountants and tax professionals

If a client's system shows a persistent gap between tax collected and tax computed under § 151.053(a), investigate it as a likely calculation error rather than treating it as an acceptable rounding variance — the Comptroller expects any such gap to be small, and any shortfall must be remitted regardless of the client's own internal calculation.

Common questions

Q: Can a business report and remit sales tax based on what its system actually collects, if that differs from the statutory calculation?
A: No — the Comptroller cannot approve a reporting method contrary to Tex. Tax Code § 151.053(a).

Q: Is sales tax rounding done on the total sale or on each item separately?
A: On the total sale of taxable items — computing and rounding tax item-by-item is prohibited.

Q: What's the actual rounding rule?
A: A fraction of a cent less than one-half cent is dropped; a fraction of one-half cent or more is collected as a full cent, applied to the tax computed on the total taxable sale.

Q: What if a retailer's system under-collects relative to the statutory calculation?
A: The retailer must still remit the tax due on its total taxable receipts, even if that's more than what its system actually collected from customers.

Q: Can I rely on this letter for my own point-of-sale tax calculation method?
A: No. This opinion is based on the facts presented, and different though similar facts could produce a different response; it can be relied on only by the taxpayer it was issued to.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.053(a) (fraction-of-a-cent rounding rule, computed on the total taxable sale)
• 34 Tex. Admin. Code Rule 3.286 (seller's and purchaser's responsibilities)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200001992L

Original ruling text

January 19, 2000

Dear **:

Your letter to Candace Cawood has been referred to me for response.

Thank you for your inquiry concerning the manner in which you may report sales
tax. You state that your computerized system calculates the amount of sales
tax due to be a different amount from the amount that is actually collected
from your retail customers. You ask for the comptroller's approval to
calculate the taxable sales amount for your sales tax reports by using the
actual tax collected.

Texas Tax Code, Section 151.053(a) states "If the sales price involves a
fraction of a dollar, the sales tax to be added to the sales price shall be
computed by multiplying the percentage rate of the sales tax times the amount
of the sale. A fraction of one cent that is less than one-half of one cent is
not collected and a fraction of one cent that is equal to one-half of one cent
or more is collected as one cent of tax."

The tax is computed on the total sale of taxable items, not on the sale of each
individual item. The rounding off of tax due is prohibited. When the tax is
collected properly under the above system, it is not necessary to report any
over collection to the comptroller. When the tax collected under the above
system is less than the tax due on the total taxable receipts, the seller must
remit the tax on the total taxable receipts. The comptroller is not able to
approve a method of reporting tax that is contrary to the Tax Code. I am
enclosing a copy of Rule 3.286 concerning seller's and purchaser's
responsibilities.

If your database is using the system in Tax Code, Section 151.053 to compute
sales tax, the differences in tax actually collected and tax due to be remitted
should be small. Large discrepancies could reflect a calculation error. If
your database is not calculating sales tax according to the above system,
excess tax collected must be remitted to the comptroller.

This opinion is based on the facts presented. Different though similar facts
could produce a different response.

If you have additional questions or need more information, you may call me at
1-800-531-5441, extension 3-4634. My regular Austin number is 512/463-4634,
and my fax number is 512/475-0900. Written correspondence may be addressed to
Tax Policy Division, Capitol Station, Austin, Tx 78774.

Yours very truly,

Elizabeth Grieder
Tax Policy Division

cc: Candace Cawood