Hiya, folks, and welcome back to another edition of Texas Tax Roundup. It seems like a lot of people might have been taking a vacation in July, getting a break from this heat, so not all that much to talk about—other than, for some reason, mixed beverages. Let’s see what happened!

Notable Additions to the State Tax Automated Research (“STAR”) System

Mixed Beverage Taxes

Audit Procedures/Additional Penalties

Comptroller’s Decision Nos. 118,594, 118,595 (2023)—The ALJ determined that the assessment of mixed beverage taxes against a taxpayer was not in error when the assessment was based on a pour test at the taxpayer’s establishment, sales receipts from the pour test, a price sheet, and vendor-reported purchases, and the taxpayer didn’t provide any evidence to support their claim that the assessment was wrong. The ALJ also upheld the assessment of a 50% additional penalty when the error rate for the assessments was approximately 86% and the taxpayer did not establish a plausible explanation for underreporting.

Comptroller’s Decision Nos. 117,911, 117,912 (2023)—The ALJ upheld the assessment of mixed beverage gross receipts tax and mixed beverage sales tax when the assessment was based on sales records and the taxpayer’s mixed beverage gross receipts tax and mixed beverage sales tax reporting and the taxpayer didn’t provide any evidence showing error. The Comptroller also upheld a 50% additional penalty when the taxpayer’s overall error rate exceeded 50% for each assessment and there was not plausible explanation for the underreporting.

Comptroller’s Decision Nos. 118,107, 118,108, 118,109 (2023)—The ALJ agreed with the assessment of mixed beverage taxes and sales and use taxes against a taxpayer that operated a restaurant and full-service bar when the taxpayer failed to provide any records demonstrating that the audit was in error. The ALJ further upheld an assessment of an additional 50% penalty against taxpayer in connection with the mixed beverage tax assessment because of the taxpayers had an overall error rate of 61.87% in the mixed beverage gross receipts tax audit and 58.3% in the mixed beverage sales tax audit with no plausible explanation for the underreporting.

Personal Liability

Comptroller’s Decision Nos. 119,048, 119,049 (2023)—The ALJ upheld a personal liability against a taxpayer who owned a company that had been assessed mixed beverage gross receipts tax and mixed beverage sales tax when 1) the taxpayer was involved in the day-to-day operations of the company and collected and all remitted the company’s mixed beverage taxes, 2) the error rate for the mixed beverage sales tax audit was 68.23% and for the mixed beverage gross receipts tax audit was 40.15%, 3) the taxpayer was listed as managing member on the company’s certificate of formation, and 4) the taxpayer was listed as the company’s managing member on its sales tax application.

Sales and Use Tax

Real Property Services

Comptroller’s Decision Nos. 118,342, 118,643, 118,644, 118,645 (2023)—The ALJ upheld the rejection of a taxpayer’s refund claim for sales tax that the taxpayer collected and paid to the Comptroller from oil and gas companies that had hired the taxpayer to remove waste. The taxpayer had failed to provide evidence that the waste was exempt waste, that its services were for new construction of real property improvements, or that the tax related to nontaxable items. The ALJ also upheld the Comptroller’s assessment of sales tax collected not remitted because the taxpayer hadn’t shown that the transactions on which tax was collected were not sales.

State and Local Tax Services

Freeman Law works with tax clients across all industries, including manufacturing, services, technology, oil and gas, financial services, and real estate. State and local tax laws and rules are complex and vary from state to state. As states confront budgetary deficits due to declining tax revenues and increased government spending, tax authorities aggressively enforce state tax laws to recapture lost revenues.

At Freeman Law, our experienced attorneys regularly guide our clients through complex state and local tax issues—issues that are frequently changing as states seek to keep pace with technology and the evolution of business. Staying ahead requires sophisticated legal counsel dedicated to understanding the complex state tax issues that confront businesses and individuals. Schedule a consultation or call (214) 984-3000 to discuss your local & state tax concerns and questions.

Have a question? Contact TL Fahring, Freeman Law.