Texas – Not so Friendly Tax State

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Texas does not have state income tax, business or personal, so you will often hear the national commentators refer to Texas “tax friendly” state. This is not always the case. Anyone doing business with the Texas Comptroller of Public Accounts should be aware of the aggressive stance of the taxation and power Comptroller to collect taxes.

tax landscape has changed dramatically in the last two years. We have $ 18 billion budget shortfall coming in the 2011 legislative session. Comptrollers have been known to fudge early deficit numbers so that they appear to be heroes as they find new sources of revenue to reduce the deficit numbers. Taxpayers should recognize that the Comptroller is to use new tools and techniques to squeeze the earnings of companies that have never had before tax

Consider -. Housewife open a home based business to sell home design fashions. She does not incorporate but has applied for and received a sales tax license. She changes her mind and never engaged in any business. Being a novice, she does not answer letters and certified mail from the Comptroller. She ignores attempts Comptroller serve her with a lawsuit. Suddenly, from her perspective, she finds her self on the bad side of $ 10,000 a default judgment for the sales tax.

How could this happen? The Comptroller may estimate sales tax numbers those companies that do not file tax returns. When calls and letters will not return, collection train can not stop, eventually ending in a default judgment with legal fees and court costs.

This story has a happy ending to what was settled for $ 1,000.00. This never should have happened, but someone to deal with the Comptroller has to understand that their position is to collect taxes

Another example -. As an out of state companies buy certain assets of another out of state companies. The due diligence its acquisition the company has not run across anything that suggests that the selling company has any ties to Texas. The deal is closed and both parties go about their business.

Several years pass and suddenly Comptroller notice of taxes due to the buyer. The Comptroller alleges that the seller had communication with Texas; the seller not file again for several years and the estimated tax due; and the sale of assets consisted of the entire company and the buyer is responsible for taxes due -. over $ 150,000

What? How could this happen?

First Comptroller determined that the seller had imposed a wage report for one quarter. This allowed the Comptroller to look into the vendor to determine whether any sales taxes were reported for that quarter. Of course, no report was submitted as Comptroller estimates the tax due is based on a typical business for the time since the report was submitted through the current date. The Comptroller scours the information sources to find out about the seller. They find press releases written by a press agent, inform the buyer has acquired the entire business of the seller. Smelling blood, Comptroller files suit to collect $ 150,000 in back taxes.

Significantly, the buyer loses a certain time limit and loses its ability to fight at the administrative level. This is not surprising, since the buyer has never slope they are dealing with all of Texas.

This issue is resolved for $ 15,000 and the buyer feel like they just did a ransom payment.

And what do these two cases teach us?

First, tax friendly state of Texas is using sophisticated IRS as tools to ferret out non-reporters and the reporters. Convenience stores owners should be aware of HB11 reports that alcohol and tobacco suppliers provide their information to the Comptroller so they can match this data with reports of C-stores sales tax.

Second, pay attention to their certified letter from the Comptroller. Most things can be resolved at the administrative level, resulting in lower legal fees. Like most content, early detection leads more flexibility in dealing with the situation and get a better result.

Finally, be aware of the best practices Comptroller’s business. Implement these practices, or as many of them as you can.

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