Tax Audit Protest and Appeal — Texas

Tax Audit Protest and Appeal (TEXAS)

Quick-Reference Summary

Part A — Informal Conference Request Letter / Independent Audit Review Request

Letterhead

[FIRM OR TAXPAYER NAME]
[________________________________]
[Street address]
[City, TX ZIP]
Telephone: [____]
Email: [________________________________]

Date

[__/__/____]

Recipient

Texas Comptroller of Public Accounts
Audit Division — [Region/Field Office]
[________________________________]

Subject

Re: Request for Independent Audit Review Conference / Pre-Petition Informal Resolution

I. Taxpayer Information

Taxpayer is a Texas [corporation / LLC / partnership / sole proprietor] with principal place of business at the address above. The undersigned [is the taxpayer / is the taxpayer's authorized representative pursuant to Form 01-137 Limited Power of Attorney, attached].

II. Notice Being Protested

Taxpayer received the Notification of Audit Results dated [__/__/____] (copy attached as Exhibit A), proposing additional [sales/use / franchise / other] tax of $[____], penalty of $[____], and interest of $[____] for audit periods [____].

III. Request for Independent Audit Review Conference

Pursuant to Comptroller policy and Audit Division procedure, Taxpayer requests an Independent Audit Review Conference with an audit supervisor outside the original audit team before proceeding to a formal Petition for Redetermination. Taxpayer believes the following issues can be substantially narrowed through informal dialogue:

1. [________________________________]
2. [________________________________]

IV. Brief Statement of Disputed Issues

1. [________________________________]
2. [________________________________]

V. Authorization

Authorized representative: [________________________________] (Texas Bar No. [____] / CPA Cert. No. [____]). Form 01-137 Limited Power of Attorney is attached as Exhibit B.

VI. Reservation of Rights

This informal request does NOT toll the 60-day deadline under Tex. Tax Code § 111.009 for filing a Petition for Redetermination. Taxpayer reserves all rights and will timely file the formal Petition by [__/__/____] regardless of conference outcome.

Signature Block

Respectfully,

_______________________________
[Name]
[Title]
Date: [__/__/____]

Attachments: (A) NOAR; (B) Form 01-137 POA; (C) Auditor's workpapers.

Part B — Formal Petition for Redetermination and Statement of Grounds

Caption

Audit No.: [________________________________]
Tax Type: [________________________________]
Audit Periods: [__/__/____] through [__/__/____]

I. Jurisdiction and Timeliness

This Petition for Redetermination is filed pursuant to Texas Tax Code § 111.009 and 34 Tex. Admin. Code § 1.7. The Notification of Audit Results was issued on [__/__/____]. This Petition is filed within 60 days of that date and is therefore timely. Petitioner requests a redetermination hearing.

II. Statement of Facts

1. Petitioner is a [corporation / LLC] organized under the laws of [State] and registered with the Texas Comptroller under Taxpayer Number [____].
2. During the audit period, Petitioner [describe business activities, e.g., sold tangible personal property in Texas / provided services / made interstate sales].
3. On [__/__/____], the Comptroller commenced an audit of Petitioner's [tax type] returns for periods [____] through [____].
4. The auditor proposed adjustments totaling $[____], itemized in the audit schedule attached as Exhibit C.
5. [________________________________].
6. [________________________________].

III. Errors of Law (Numbered Contested Items)

Contested Item No. 1 — [Issue title, e.g., Sale-for-Resale Exclusion]

The Comptroller erroneously included $[____] in taxable sales for which Petitioner accepted properly executed Form 01-339 Resale Certificates. Sales for resale are excluded from "sale" under Tex. Tax Code § 151.006 and 34 Tex. Admin. Code § 3.285. See Combs v. Roark Amusement & Vending, L.P., 422 S.W.3d 632 (Tex. 2013).

Contested Item No. 2 — [Issue title]

[________________________________]

Contested Item No. 3 — [Issue title]

[________________________________]

IV. Errors of Fact

Fact Error No. 1. The audit treats $[____] in transactions as taxable sales when in fact those transactions were [exempt / non-Texas-sourced / excluded], as evidenced by the resale certificates, exemption certificates, and bills of lading at Exhibit D.

Fact Error No. 2. [________________________________].

V. Requested Relief

Petitioner requests that the Comptroller:

1. Reduce the proposed deficiency to $0; or in the alternative,
2. Recompute the deficiency to $[____] consistent with the corrections set forth herein;
3. Waive penalties for reasonable cause under Tex. Tax Code § 111.103 and 34 Tex. Admin. Code § 3.5;
4. Recalculate interest accordingly; and
5. Issue a revised Notification of Audit Results consistent with the foregoing.

VI. Burden of Proof and Standard of Review

The Comptroller's determination is presumed correct, and Petitioner bears the burden of proving the deficiency wrong by a preponderance of the evidence. Bullock v. Foley Bros. Dry Goods Corp., 802 S.W.2d 835, 836 (Tex. App.—Austin 1990, writ denied). Petitioner has met that burden as shown by the facts, exhibits, and legal authorities set forth herein.

VII. Evidence Offered

VIII. Request for Hearing

☐ Oral redetermination hearing at SOAH (in-person, Austin)
☐ Oral redetermination hearing by videoconference
☐ Submission on written record only (no oral hearing)

IX. Settlement Authority

Petitioner is interested in resolving this matter through:

☐ Negotiated settlement under 34 Tex. Admin. Code § 1.40
☐ Voluntary Disclosure Agreement program (if applicable to additional periods)
☐ Penalty waiver under Tex. Tax Code § 111.103

Signature Block and Verification

I declare under penalty of perjury that the foregoing Statement of Grounds is true and correct to the best of my knowledge and belief and is filed in good faith.

Executed at [City], Texas, on [__/__/____].

_______________________________
[Petitioner or authorized representative]
[Printed name and title]
Texas Bar No. / CPA Cert. No.: [____]

Part C — Motion for Rehearing and Appeal to District Court

Letterhead

[FIRM NAME]

Date

[__/__/____]

Recipient (Motion for Rehearing)

Texas Comptroller of Public Accounts
Attn: Office of the Special Counsel for Tax Hearings
P.O. Box 13528, Capitol Station
Austin, TX 78711-3528

Recipient (Judicial Appeal)

District Clerk, Travis County
1000 Guadalupe Street
Austin, TX 78701
(Travis County District Court has exclusive venue under Tex. Tax Code §§ 112.052, 112.151)

Re: Appeal from Comptroller's Decision dated [__/__/____]

I. Parties

II. Decision Being Appealed

Comptroller's Decision issued [__/__/____] in Hearing No. [____], affirming a deficiency of $[____] in [tax type] for audit periods [____] through [____].

III. Timeliness Statement

• Motion for Rehearing filed within 25 days of Comptroller's Decision per Tex. Tax Code § 111.105.
• Motion overruled (by order or operation of law) on [__/__/____].
• Tax paid under protest on [__/__/____] in the amount of $[____].
• This suit is filed within 90 days of the date the motion was overruled and within 30 days of payment under protest as required by Tex. Tax Code § 112.052(b).

IV. Statement of Issues

1. Whether the Comptroller's Decision is supported by substantial evidence as required by Tex. Gov't Code § 2001.174(2)(E).
2. Whether the Comptroller erred as a matter of law in [________________________________].
3. [________________________________].

V. Standard of Review

Judicial review under Tex. Tax Code § 112.052 is trial de novo on the contested items (Tex. Tax Code § 112.054). Plaintiff is entitled to a new trial on the merits and is not limited to the administrative record.

VI. Relief Requested

Plaintiff respectfully requests that the Court:

1. Declare the Comptroller's Decision void and the assessment unenforceable;
2. Order refund of all tax, penalty, and interest paid under protest, plus statutory interest;
3. Award costs and attorney's fees as authorized; and
4. Grant such other and further relief to which Plaintiff is justly entitled.

Signature Block

Respectfully submitted,

_______________________________
[Counsel of record]
State Bar of Texas No. [____]
[Firm name and address]
Email: [________________________________]
Counsel for Plaintiff
Date: [__/__/____]

Part D — Pre-Filing Checklist

Notice and calendaring
☐ NOAR received date diaried: [__/__/____]
☐ 60-day petition deadline calendared with 7-day buffer: [__/__/____]
☐ 20-day jeopardy deadline checked (if applicable)
☐ 25-day motion for rehearing deadline calendared (post-decision)
☐ 90-day judicial appeal deadline calendared

Authority and authorization
☐ Form 01-137 Limited Power of Attorney signed and filed
☐ Authorized representative's Texas Bar / CPA license verified
☐ Conflict check completed

Records gathering
☐ Auditor's workpapers and Audit Adjustment Report obtained
☐ Webfile / eSystems transcripts pulled for all periods
☐ Resale and exemption certificates compiled
☐ Sales journals, GL, bank statements, invoices assembled
☐ Federal returns and any IRS audit documents collected

Legal analysis
☐ Texas Tax Code and 34 TAC provisions identified for each contested item
☐ STAR (State Tax Automated Research) hearings reviewed for adverse and supportive authority: star.comptroller.texas.gov
☐ Comptroller policy letters and recent Court of Appeals decisions checked
☐ Penalty waiver / reasonable cause analyzed under 34 TAC § 3.5

Settlement considerations
☐ Independent Audit Review Conference requested where appropriate
☐ Negotiated settlement under 34 TAC § 1.40 evaluated
☐ Voluntary Disclosure Agreement reviewed for additional periods
☐ Bypass option (Notice of Intent to Bypass Hearing) evaluated

Filing mechanics
☐ Petition sent via certified mail RRR to Comptroller Hearings (P.O. Box 13528)
☐ Statement of Grounds signed by taxpayer or authorized representative
☐ All contested items specifically identified
☐ Copy retained with proof of mailing
☐ Calendar entry for Comptroller acknowledgment (~30–60 days)

Sources and References

• Texas Comptroller, Contesting Disagreed Audits, Examinations and Refund Denials (Publication 96-1253): https://comptroller.texas.gov/taxes/publications/96-1253.pdf
• Texas Comptroller, Auditing Fundamentals Manual, Chapter 8: https://comptroller.texas.gov/taxes/audit/manuals/fundamentals/ch8.php
• 34 Tex. Admin. Code Chapter 1 (Practice and Procedure): https://texreg.sos.state.tx.us
• State Office of Administrative Hearings: https://www.soah.texas.gov
• STAR System (Comptroller hearings, policy letters): https://star.comptroller.texas.gov
• Tex. Tax Code §§ 111.008, 111.009, 111.0081, 111.103, 111.105, 111.201, 111.205, 112.052, 112.151
• Tex. Gov't Code Chapter 2001 (APA); § 2001.146 (Motion for Rehearing); § 2001.174 (judicial review)
• Form 01-137, Limited Power of Attorney
• Form 01-339, Texas Sales and Use Tax Resale Certificate