Could a taxpayer use modified invoices obtained after completed transactions to satisfy a separate-statement requirement and change the sales-tax result?

Plain-English summary

Executive Counsel rejected modified invoices obtained after a transaction had concluded. The letter compared them to completed contracts, which could not be changed after full execution merely to produce a different tax result.

The requester analogized the documents to resale or exemption certificates obtained after a sale. Executive Counsel distinguished those certificates: they generally documented the parties' preexisting common understanding that the transaction was exempt. Here, taxability depended on the form the transaction actually took, and the modified invoices were obtained only to alter the result.

Allowing later invoices also would undermine the act's separate-statement provision, which the letter said was designed to avoid audit and hearing problems.

Common questions

Could the completed transaction be recharacterized with a later modified invoice? No.

Why were later exemption certificates different? They generally verified an exemption understanding that already existed between the parties.

What controlled the transaction in this case? The form the transaction took when completed, including the separate-statement requirement.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8608L0749C04

Original ruling text

August 4, 1986

Dear ***:

I have read your letter concerning after-acquired invoices and am still
of the opinion that modified invoices acquired after the conclusion of a
transaction should not be allowed.

You compared after-acquired invoices to resale/exemption certificates
acquired after the fact. In my opinion, these are more properly
compared to completed contracts which we do not allow to be modified
after they are fully executed.

In the case of resale and exemption certificates, the parties generally
operated under an understanding that the transaction was exempt and the
certificates are obtained to verify their common understanding.

In the case at hand, the transaction becomes taxable based not upon the
understanding of the parties but upon the form the transaction takes.
The modified invoices are only acquired to alter a tax result.

The provision requiring separate statement was placed in the act to
avoid auditing and hearings problems. To allow after-acquired invoices
would substantially nullify the provision in my opinion.

Sincerely,

Executive Counsel