Ezel / Tax Rulings / TX
TX 9002L0977F14 Sales and/or Use Tax (State,Local,MTA) 1990-02-09

Could a taxpayer claim detrimental reliance based on a prior audit despite the disclaimer in Texas Audit Results letters?

Short answer: Not merely because an auditor failed to detect an error. The disclaimer barred that theory, but it did not bar a claim based on specific erroneous written or oral advice given during the audit if the taxpayer could prove the advice.

Apply this to your situation

This page answers the general question as of 1990. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1990
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

This internal Comptroller memorandum explained the effect of the disclaimer placed in Audit Results letters since June 1983.

The disclaimer prevented a taxpayer from claiming detrimental reliance merely because a previous auditor failed to notice the taxpayer's reporting error. It did not prevent a reliance finding when an auditor gave the taxpayer erroneous written or oral advice during the audit.

The taxpayer still had to prove that the erroneous advice was actually given.

Common questions

Did a clean prior audit approve the taxpayer's reporting system? No. The disclaimer was designed to prevent that inference from an auditor's failure to spot errors.

Could incorrect audit advice support reliance? Potentially yes, whether written or oral.

What did the taxpayer still have to prove? That the auditor actually gave the erroneous advice.

Source

Original ruling text

INTEROFFICE BOB BULLOCK
MEMORANDUM COMPTROLLER OF
PUBLIC ACCOUNTS

February 9, 1990

TO: Administrative Law Judge's

FROM: Mark Weiss

SUBJECT: Detrimental Reliance on Prior Audits

Since June of 1983, Audit Results letters have carried a dis-
claimer paragraph. The disclaimer warns taxpayers that they
cannot treat the results of the audit as approval of their tax
reporting system. The disclaimer was added to halt detrimental
reliance claims based on a prior auditor's failure to spot
taxpayer errors.

Executive clarified the agency position of the disclaimer:

1) The disclaimer prohibits a finding of detrimental
reliance based on a auditor's failure to spot taxpayer
errors;

2) The disclaimer does not prohibit a finding of
detrimental reliance based on a auditor's erroneous
advice (written or verbal) given to a taxpayer (given
during the course of an audit). Of course, the taxpayer
would still have to prove the erroneous advice was given.

Get today's answer for your situation

You just read a 1990 ruling on this question. Ezel checks current Texas tax law and answers your specific situation, with citations.

Opens in Ezel Pro. Every answer cites the authority it relies on.