Can an outside accountant who prepares a client's sales tax reports for a fee be held personally liable for the client's unpaid sales tax under Texas's responsible-person rule?

Plain-English summary

A public accountant asked the Comptroller's Tax Policy Division to explain what it means to "control or supervise the accounting for, collection or payment of tax" under a recent amendment to Section 111.016 of the Texas Tax Code — the provision that can impose personal liability on individuals for a business's unpaid tax. The accountant prepared sales tax reports and Texas Inheritance reports for clients for a fee, explained to clients that they owed the amounts shown, and wanted to know whether that role exposed the accountant personally to liability, and if so, how to change practices to avoid it.

The Comptroller's office responded that personal liability for "control or supervision" of the accounting, collection, or payment of tax generally extends only to officers, managers, directors, partners, and other employees whose duties include collecting, accounting for, or paying a business's state taxes. Outside accountants who merely take data provided by a client, summarize it, and prepare a tax report for the client to submit along with payment are not considered responsible for the accounting, collection, or payment of tax, and so would not be personally liable on that basis.

The letter notes the opinion is based on the facts presented, and that other, similar facts may lead to a different result.

What this means for you

Outside accountants and tax preparers

If your role is limited to taking the numbers a client gives you, summarizing them, and preparing a sales tax (or similar) report for the client to file and pay, this letter indicates you are not treated as "controlling or supervising" the client's tax accounting, collection, or payment for purposes of personal liability under Section 111.016. Personal liability is instead aimed at people inside the business — officers, managers, directors, partners, and employees — whose job duties include collecting, accounting for, or paying the business's taxes.

Business owners and their staff

If you or your employees actually handle collecting, accounting for, or remitting your company's state taxes (as opposed to just relying on an outside preparer), this letter is a reminder that Section 111.016 can reach those individuals personally. The line the Comptroller draws is between people who perform or supervise those functions within the business and outside service providers who only compile client-supplied data into a report.

Accountants weighing how they structure engagements

The letter suggests that staying on the "not liable" side of this line depends on the accountant's actual role: taking client data, summarizing it, and preparing a report for the client to submit and pay is the described safe pattern. Taking on duties that amount to controlling or supervising the client's tax collection or payment could change the analysis, though this letter does not spell out where that line falls beyond the facts described.

Common questions

Q: Can an outside accountant be held personally liable for a client's unpaid sales tax just for preparing the client's tax reports?
A: Based on this letter, no — an accountant who merely takes client-provided data, summarizes it, and prepares a report for the client to submit with payment is not considered to control or supervise the accounting, collection, or payment of tax.

Q: Who can be personally liable under Section 111.016 for a business's unpaid tax?
A: The letter states that responsibility for "control or supervision" of the accounting, collection, or payment of tax generally extends only to officers, managers, directors, partners, and other employees whose duties include collecting, accounting for, or paying state taxes.

Q: Does this letter guarantee the same result for every accountant in a similar position?
A: No. The letter says the opinion is based on the facts presented and that other facts, even if similar, may produce a different result. It was also written for a specific requester and is not a public precedent other taxpayers can rely on the same way.

Citations and references

Statutes and rules:

• Section 111.016, Texas Tax Code (personal liability of persons who control or supervise the accounting for, collection, or payment of tax)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9512L1397F08

Original ruling text

December 7, 1995

Dear **:

This is in response to your request for a definition or
opinion on imposition of personal liability on individuals who control or
supervise the accounting for, collection or payment of tax, under a recent
legislative amendment to Section 111.016 of the Texas Tax Code. You are
specifically asking for an explanation of the meaning of "control and
supervision of the accounting for, collection or payment of tax."

You are in the practice of public accounting and
prepare sales tax reports and Texas Inheritance reports for your clients. In
preparing those reports for a fee and in the explanation to your clients that
they must pay, you are requesting whether you would fall under the "control and
supervision of the accounting for, collection or payment of tax" portion of
this amended Texas Tax Code? And if so, how can you change your procedures so
as not to be in "controller supervision of the accounting for, collection or
payment of tax".

Response: The responsibility for "control or
supervision" of the accounting, collection or payment of tax generally extends
only to officers, managers, directors, partners and other employees whose
duties include collecting, accounting for or paying state taxes. Outside
accountants, that merely take data provided by a client, summarize the data and
prepare a tax report for the client to submit along with payment, would not be
considered to be responsible for the accounting, collecting or payment of tax.

This opinion is based on the facts presented. Other
facts though similar may provide a different result. You may call me
toll-free at 1-800-531-5441, extension 3-4502. The direct line is
512/463-4502. You may also write to Tax Policy Division, Comptroller of Public
Accounts.

Sincerely,

Gilbert Zamora
Tax Policy Division

NOTE: Previous Accession Number 9512068L