Texas Comptroller Sales Tax Audit Help and State Tax Debt Relief

What "state tax debt" means in Texas

Because Texas doesn't tax personal income, most Texans only owe state tax through a business. The Texas Comptroller of Public Accounts administers the taxes that cause the most trouble:

• Sales and use tax. Collected from customers and remitted to the state, at a 6.25% state rate plus up to 2% in local taxes. Many cities are at the 8.25% combined maximum. Use tax applies to taxable items your business buys without paying sales tax, such as out-of-state equipment purchases.
• Franchise tax. An annual tax on most entities doing business in Texas, including corporations, LLCs, and partnerships. Many small businesses owe no tax because they fall below the revenue threshold, but they still have reporting requirements.
• Other Comptroller taxes, including mixed beverage taxes for bars and restaurants, hotel occupancy tax, and motor vehicle and fuel taxes for certain businesses.

State unemployment tax is separate and handled by the Texas Workforce Commission.

The difference from many IRS problems: sales tax is money your customers paid that the state considers its own. Like federal payroll taxes, it's treated as held in trust, and the consequences for not remitting it are serious.

Texas Comptroller sales tax audits

Comptroller audits commonly cover a four-year period, the general statute of limitations for assessing sales tax, which can be extended by agreement. An auditor reviews your sales records, exemption and resale certificates, and purchase invoices to find:

• Untaxed sales that should have been taxed
• Exempt sales without documentation, especially missing resale or exemption certificates
• Use tax on purchases, such as equipment, supplies, and software bought from vendors that didn't charge Texas tax
• Errors in local tax, like the wrong rate or location

For businesses with a high volume of transactions, auditors often use sampling: they review a sample period and project the error rate across the whole audit period. A small error in the sample can produce a large assessment, which makes the sampling method one of the most important things to get right early.

How we help during an audit

• We handle communication with the auditor so you're not answering questions on the fly.
• We review the sampling plan and push back on samples that aren't representative.
• We gather exemption and resale certificates, sometimes after the fact, to eliminate errors on exempt sales.
• We look for overpayments, such as tax you paid on purchases that were actually exempt, which can offset the assessment.
• We review the auditor's work papers before the audit is finalized.

Contesting an assessment: the 60-day window

When an audit ends with tax due, the Comptroller issues a Notice of Determination. You generally have 60 days to request a redetermination hearing. A timely request preserves your right to challenge the assessment before it becomes final. Contested cases may be heard through the State Office of Administrative Hearings.

When the Comptroller collects

Unpaid Texas tax can lead to collection steps that are just as disruptive as the IRS's:

• Bank account freezes and levies on business accounts
• State tax liens filed against business and personal property
• Revocation of your sales tax permit, which means you can't legally make taxable sales
• Security requirements, such as a bond, to keep or reinstate a permit
• Personal liability for owners and officers. Texas law allows the state to hold individuals who control a business's finances personally liable when collected sales tax is willfully not paid.

Franchise tax: forfeiture and personal liability

Franchise tax reports are generally due May 15 each year. If an entity doesn't file or pay, the Comptroller can forfeit its right to transact business in Texas. That entity can't defend itself in Texas courts, and the Secretary of State can eventually forfeit its charter or registration.

The bigger risk is personal: officers and directors of a forfeited entity can become personally liable for debts the entity creates after the report was due and before its rights are restored. That includes ordinary business debts, not just taxes. If you suspect your entity has been forfeited, reinstating it should be a priority. We file the missing reports, resolve the balance, and request reinstatement.

Resolution options with the Comptroller

• Payment plans. The Comptroller offers installment arrangements for many balances, usually requiring current filing and a down payment.
• Penalty waivers. Late-filing penalties (5% when 1–30 days late, 10% after 30 days) can sometimes be waived, especially for businesses with a good compliance history or reasonable cause.
• Voluntary disclosure agreements. For businesses that should have been registered and filing but weren't, a voluntary disclosure agreement can limit how far back the state looks and generally waives penalties, if you come forward before the Comptroller contacts you.
• Contesting the tax. Through redetermination and, if necessary, further administrative or judicial review.

Texas doesn't have a broad settlement program like the IRS offer in compromise. That makes audit defense and penalty relief more important here.

Buying or selling a Texas business

If you buy a Texas business, you can be liable for the seller's unpaid sales tax unless the purchase price is withheld or the seller gets a certificate showing no tax is due. We help buyers and sellers check Comptroller account status before closing.