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Jun 9 2025

202004017H

And while Petitioner’s expectation that advice received from a Comptroller employee could be relied upon is reasonable, the Comptroller will only give relief to a taxpayer who follows erroneous advice, and the ALJ finds the totality of information in the letter was not incorrect or erroneous.  See id. § 3.10(c). 

Minor horror story on a technicality of detrimental reliance. The Comptroller provided correct, but incomplete information as to what tax should be collected. The taxpayer followed it to their detriment, and is now penalized and cannot receive relief.

This is why an expert is useful. When the Comptroller gives advice, it significantly less binding than taxpayers hope for, and it really helps to have a taxpayer-side expert to determine if the advice is even appropriate to the full fact pattern.

202004017H

SOAH DOCKET NO. 304-20-1533.26
CPA HEARING NO. 116,489

RE:  **************
TAXPAYER NO:    **************
AUDIT OFFICE:    **************
AUDIT PERIOD:   July 1, 2014 THROUGH March 31, 2018

Sales And Use Tax/RDT

BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS

GLENN HEGAR
Texas Comptroller of Public Accounts

KIM LAFLAIR
Representing Respondent

**************
Representing Petitioner

 

COMPTROLLER’S DECISION

This decision is considered final on May 26, 2020, unless a motion for rehearing is timely filed; this date of finality is calculated based on the Administrative Procedure Act (APA).[1]  The failure to timely file a motion for rehearing may result in adverse legal consequences.

Administrative Law Judge (ALJ) Jenny Burleson of the State Office of Administrative Hearings (SOAH) issued a Proposal for Decision (PFD) that includes Findings of Fact and Conclusions of Law.  SOAH served the PFD on each party and each party was given an opportunity to file exceptions and replies with SOAH in accordance with SOAH’s rules of procedure.  The ALJ recommended that the Comptroller adopt the PFD as written.

After review and consideration, IT IS ORDERED that the PFD is adopted as written. 

The result from this Decision is Attachment A.  The ALJ’s letter to the Comptroller is Attachment B.  The PFD as written is Attachment C.  Attachments A, B, and C are incorporated by reference.

Attachment A reflects a liability.

The total sum of the tax, penalty, and interest is due and payable 20 days after a comptroller’s decision becomes final.[2]  If such sum is not timely paid, an additional penalty of 10 percent of the taxes due will accrue.

SIGNED on this 29th day of April 2020

GLENN HEGAR
Comptroller of Public Accounts

By: Lisa Craven
Deputy Comptroller

Attachment A, Texas Notification of Hearing Results
Attachment B, ALJ’s letter to the Comptroller
Attachment C, Proposal for Decision as written

 

 

ATTACHMENT C

 

 

SOAH DOCKET NO.  304-20-1533.26
TCPA DOCKET NO. 116,489

**************
Taxpayer No. **************

v.

TEXAS COMPTROLLER OF PUBLIC ACCOUNTS

BEFORE THE STATE OFFICE OF ADMINISTRATIVE HEARINGS

 

PROPOSAL FOR DECISION         

The Tax Division (Staff) of the Texas Comptroller of Public Accounts (Comptroller) audited ************** (Petitioner) for compliance with Texas sales and use tax laws and made an assessment that included tax and interest.  Staff waived penalty.  Petitioner requested redetermination contending that: (1) it detrimentally relied on correspondence from the Comptroller’s office regarding its local tax collection responsibilities, and (2) the adjustments for local taxes that were not collected based on the job locations were erroneous and should be removed.  In this Proposal for Decision, the Administrative Law Judge (ALJ) finds that the audit assessment should be affirmed. 

I.  PROCEDURAL HISTORY, NOTICE, AND JURISDICTION

Staff referred the case to the State Office of Administrative Hearings (SOAH) and, on December 11, 2019, issued a Notice of Hearing by Written Submission.  The next day, ALJ Jenny Burleson issued Order No. 1, which set the written submission hearing.  Petitioner was represented by its manager and vice-president, **************, and Staff was represented by Kimberly LaFlair.  The record closed March 20, 2020.  There are no issues of notice or jurisdiction; therefore, those matters are set out in the Findings of Fact and Conclusions of Law without further discussion here. 

II.  REASONS FOR DECISION

A.  Evidence Presented

Staff submitted the pleadings the parties exchanged before the case was referred to SOAH and offered the following exhibits for admission into evidence:

1. 60-Day Letter;

2. Texas Notification of Audit Results;

3. Penalty and Interest Waiver Worksheet;

4. Audit Report;

5. Audit Plan;

6. Local Sales and Use Tax Bulletin, February 2009;

7. July 26, 2006 Letter from the Comptroller to Petitioner; and

8. Exit Conference Detail from Petitioner’s Prior Audit (December 1, 2010, through June 30, 2014).

Petitioner attached the following exhibits to its Statement of Grounds and Reply to Staff’s Position Letter:

1. October 28, 2018 Letter from the Comptroller to Petitioner re: Audit;

2. Page 1 of the Audit Report;

3. Texas Notification of Audit Results;

4. April 11, 2016 Letter from Petitioner;

5. July 26, 2006 Letter from Comptroller to Petitioner; and

6. Emails between Petitioner and Auditor re: Payment.

The parties’ exhibits are admitted into the record without objection.

B.  Agreements

Staff did not agree to make any adjustments to audit assessment. 

C.  Material Facts and Contested Issues

During the period at issue, Petitioner provided ready-mix concrete delivery services, using twenty of its own trucks for delivery, in the CITY A, Texas area.  Petitioner also sold concrete block boxes.  The majority of Petitioner’s customers were homeowners, home builders, and exempt entities.  In August 2017, Staff initiated a sales and use tax compliance audit of Petitioner for the period July 1, 2014, through March 31, 2018.  Petitioner provided sales invoices, sales journals, charts of accounts, general ledgers, financial statements, depreciation schedules, bank statements, federal income tax returns, and tax work papers.  The auditor completed detailed examinations of Petitioner’s purchases and made adjustments for taxable purchases of assets and expenses on which no tax was paid or accrued.  Petitioner does not contest the audit assessment related to its purchases.  For Petitioner’s sales, because of the high volume of transactions, the auditor completed two sample and projection examinations.  The auditor made adjustments for disallowed deductions and for local taxes because Petitioner did not collect local tax based on the job locations. 

On October 29, 2018, Staff issued Petitioner a Texas Notification of Audit Results, assessing tax and interest.  Staff waived penalty.  Petitioner paid the assessment but requested redetermination.  Petitioner does not contest the audit assessment related to disallowed deductions or that local tax was due, but contends it detrimentally relied on correspondence it received from the Comptroller in 2006 that it understood to mean Petitioner did not have to collect local tax.  Petitioner stated that prior to receiving the letter from the Comptroller, it had been collecting 8.25% tax on its sales, but after it received the letter, it only collected 6.25%. 

The letter, sent by Aurora Moore from the Comptroller’s Account Maintenance Division, is dated July 26, 2006, and is addressed directly to Petitioner at ADDRESS, in CITY B, Texas.  The letter states that it came to the Comptroller’s attention that Petitioner’s business was located outside the city limits of Seagoville and that “has caused a change in your local sales tax collection responsibility.”  The letter notifies Petitioner that it would be receiving a corrected sales tax permit for the location and the change would be effective September 1, 2006. 

The letter further states that based on the change, “taxable sales made from this location are subject to a total tax rate of 6.25 percent (6.25 percent Texas state sales tax).”  Petitioner states that based on that language, it believed all of its sales, including sales made from its Seagoville location and the deliveries to its customers throughout the Dallas area, were only subject to 6.25% state sales tax, and it did not need to collect local tax up to 2% on any of its sales.  Staff acknowledges that the letter contains that information but contends the letter also notified Petitioner that there were exceptions to the rules for collecting local tax that may affect Petitioner’s local sales tax collection responsibility. 

Staff points out that the letter references the Comptroller’s “Guidelines for Collecting Local Sales and Use Tax,” which described the exceptions and was provided with the letter.  The letter tells Petitioner to “please review the guidelines to determine if any exceptions apply to your business.”  Neither party provided a copy of the guidelines that were attached to the letter the Comptroller sent Petitioner.  Staff provided a copy of guidelines dated February 2009.  The letter also states that if Petitioner has any questions or needs more information, to please call the Comptroller, and it provided a telephone number with an extension. 

Petitioner also contends that the current audit period included a period of time covered in a previous audit and transactions occurring during that time should be removed from the sample.  Petitioner was previously audited for the period December 1, 2010, through June 30, 2014.  The exit conference for the previous audit occurred on February 18, 2015. 

Petitioner made the same errors in the previous audit that it made in the current audit; however, because Petitioner learned in that audit that it needed to collect local tax, it began collecting local tax in January 2015.  The sample and projection examination completed for current audit of the local tax targeted only the transactions between periods of July 2014 through December 2014.  The auditor segregated the taxed sales for that period and then further segregated only sales tax collected at 6.25%.  The auditor then eliminated all the sales made from Petitioner’s business location in Seagoville from the population. 

D.  Analysis and ALJ Recommendations

Petitioner argued that it relied on Comptroller advice to its detriment with regard to the amount of local tax it was required to collect.  The Comptroller has long held that if the Comptroller’s office “by certain communications or conduct directed to a given taxpayer has induced that taxpayer to act in a particular manner, the Comptroller should not later adopt a contrary position or course of conduct that will cause the taxpayer loss, harm, or detriment as a result of its reliance on the earlier Comptroller action.” See, e.g., Comptroller’s Decision Nos. 27,506 (1991).  Pursuant to the Comptroller’s administrative rule, he will consider giving relief to a taxpayer who was harmed by following erroneous advice given by an agency employee, if the taxpayer provided complete and accurate information to the employee.  34 Tex. Admin. Code § 3.10(c).  The taxpayer’s evidence must demonstrate:  (1) the substance of the information or advice and that it was communicated directly to the taxpayer in a private letter ruling; (2) that the taxpayer followed the information or advice; (3) that the taxpayer gave sufficient information to have resulted in correct advice and did not misrepresent information, or withhold or conceal information that would affect the advice; and (4) the taxpayer has suffered, or will suffer, harm based on the erroneous advice unless the Comptroller provides the requested relief.  Id. § 3.10(c)(1). 

Petitioner has shown that it relied on information from the Comptroller and will suffer harm based on the information unless the Comptroller provides relief.  See id. § 3.10 (c)(1)(B), (D).  The information regarding the local tax rate was contained in formal, written communication from the Comptroller.  See id. § 3.10(c)(1)(A).[3]  And while Petitioner’s expectation that advice received from a Comptroller employee could be relied upon is reasonable, the Comptroller will only give relief to a taxpayer who follows erroneous advice, and the ALJ finds the totality of information in the letter was not incorrect or erroneous.  See id. § 3.10(c). 

The portion of the letter Petitioner relied on for determining how to tax all of its sales, dealt only with sales made at Petitioner’s place of business.  The letter contained correct information in that all of the sales made at Petitioner’s place of business were outside the city limits of Seagoville and should have only been taxed at 6.25%.  However, Petitioner also used its own trucks to deliver ready-mix concrete and other products to many locations.  Petitioner is presumed to know the law as it relates to its business and is responsible for compliance.  See Comptroller’s Decision No.  43,681 (2004).  A ready mix concrete contractor must collect and remit the tax due on the concrete produced and consumed, and the tax rate in effect at the job site location is applied to the greater of the actual invoice price of the component materials or the fair market value of the concrete incorporated into the project.  34 Tex. Admin. Code § 3.291(b)(3)(E); see also § 3.334(k)(8), (9). 

Further, had Petitioner considered the information contained in the remainder of the letter, Petitioner would have found that it was required to collect local tax based on its deliveries of ready mix concrete to the job sites. The letter notified Petitioner that there were exceptions to the rules for collecting local tax that may affect its local sales tax collection responsibility, and it referenced guidelines that Petitioner could refer to for more information. 

It is unclear from the record whether the 2009 guidelines submitted by Staff contained the same information as the guidelines provided to Petitioner with the 2006 letter from the Comptroller; however, it is sufficient that the Comptroller notified Petitioner that it may have other tax collection responsibilities and provided Petitioner with guidance to review. Additionally, the letter provided contact information for Comptroller personnel if Petitioner had questions.  Petitioner did not utilize the information the Comptroller provided and did not provide the Comptroller with sufficient information for the Comptroller to provide more thorough advice.  See id. § 3.10(c)(1)(C).  The ALJ finds Petitioner did not establish a basis for detrimental reliance relief. 

Petitioner also argued that the current audit covered a period that was already assessed in the prior audit.  Petitioner has the burden of proof by a preponderance of the evidence to show that the audit was erroneous.  Id. § 1.26(e).  Petitioner did not provide any further argument regarding this point and did not provide any evidence to support its contention.  Further, the evidence in the record shows that the current audit only included an assessment for local tax for the six months after the prior audit period ended in June 2014.  Therefore, the ALJ finds Petitioner did not prove by a preponderance of the evidence that the audit, as it relates to local tax due, was erroneous.  The audit assessment should be affirmed in its entirety.  

III.  FINDINGS OF FACT

1. During the period at issue, ************** (Petitioner) provided ready-mix concrete delivery services, using twenty of its own trucks for delivery in the CITY A, Texas area.  Petitioner also sold concrete block boxes. 

2. The majority of Petitioner’s customers were homeowners, home builders, and exempt entities. 

3. In August 2017, the Tax Division (Staff) of the Texas Comptroller of Public Accounts initiated a sales and use tax compliance audit of Petitioner for the period July 1, 2014, through March 31, 2018. 

4. Petitioner provided sales invoices, sales journals, charts of accounts, general ledgers, financial statements, depreciation schedules, bank statements, federal income tax returns, and tax work papers. 

5. The auditor completed detailed examinations of Petitioner’s purchases and made adjustments for taxable purchases of assets and expenses on which no tax was paid or accrued. 

6. Petitioner does not contest the audit assessment related to its purchases. 

7. For Petitioner’s sales, because of the high volume of transactions, the auditor completed two sample and projection examinations and made adjustments for disallowed deductions and for local taxes where Petitioner did not collect local tax based on the job locations. 

8. Petitioner does not contest the audit assessment related to disallowed deductions or that local tax was due.  

9. On October 29, 2018, Staff issued Petitioner a Texas Notification of Audit Results, assessing tax and interest.  Staff waived penalty. 

10. Petitioner paid the assessment but requested redetermination contending it detrimentally relied on correspondence it received from the Comptroller in 2006 that it understood to mean Petitioner did not have to collect local tax. 

11. Prior to receiving the letter from the Comptroller, Petitioner had been collecting 8.25% tax on its sales, and after it received the letter, it only collected 6.25%. 

12. On July 26, 2006, Aurora Moore from the Comptroller’s Account Maintenance Division sent a letter addressed directly to Petitioner at ADDRESS, in CITY B, Texas.  

13. The letter states that it came to the Comptroller’s attention that Petitioner’s business was located outside the city limits of Seagoville and that “has caused a change in your local sales tax collection responsibility.”  

14. The letter notifies Petitioner that it would be receiving a corrected sales tax permit for the location and the change would be effective September 1, 2006. 

15. The letter states that, based on the change, “taxable sales made from this location are subject to a total tax rate of 6.25 percent (6.25 percent Texas state sales tax).” 

16. The letter references the Comptroller’s “Guidelines for Collecting Local Sales and Use Tax,” which described the exceptions and was provided with the letter.  The letter tells Petitioner to “please review the guidelines to determine if any exceptions apply to your business.” 

17. The letter states that if Petitioner has any questions or needs more information, to please call the Comptroller, and it provided a telephone number with an extension. 

18. Petitioner was previously audited for the period December 1, 2010, through June 30, 2014. 

19. Petitioner made the same errors in the previous audit that it made in the current audit; however, because Petitioner learned in that audit that it needed to collect local tax, it began collecting local tax in January 2015. 

20. The exit conference for the previous audit occurred on February 18, 2015. 

21. The sample and projection examination completed for current audit of the local tax targeted only the transactions between periods of July 2014 through December 2014.  The auditor segregated the taxed sales for that period and then further segregated only sales tax collected at 6.25%.  The auditor then eliminated all the sales made from Petitioner’s business location in Seagoville from the population. 

22. Staff referred the case to the State Office of Administrative Hearings (SOAH), and on December 11, 2019, issued a Notice of Hearing by Written Submission.  The notice contained a statement of the nature of the hearing; a statement of the legal authority and jurisdiction under which the hearing was to be held; a reference to the particular sections of the statutes and rules involved; and a short, plain statement of the factual matters asserted or an attachment that incorporated by reference the factual matters asserted in the complaint or petition filed with the state agency.  

23. On December 12, 2019, the Administrative Law Judge issued Order No. 1, which set the written submission hearing. 

24. The record closed March 20, 2020.

IV.  CONCLUSIONS OF LAW

1. The Comptroller has jurisdiction over this matter.  See Tex. Tax Code ch. 111.

2. SOAH has jurisdiction over matters related to the hearing in this matter, including the authority to issue a proposal for decision with findings of fact and conclusions of law.  See Tex. Gov’t Code ch. 2003.

3. Staff provided proper and timely notice of the hearing.  See Tex. Gov’t Code ch. 2001; Tex. Tax Code § 111.009.

4. If the Comptroller’s office “by certain communications or conduct directed to a given taxpayer has induced that taxpayer to act in a particular manner, the Comptroller should not later adopt a contrary position or course of conduct that will cause the taxpayer loss, harm, or detriment as a result of its reliance on the earlier Comptroller action.”  See, e.g., Comptroller’s Decision Nos. 27,506 (1991). 

5. The Comptroller will consider giving relief to a taxpayer who was harmed by following erroneous advice given by an agency employee, if the taxpayer provided complete and accurate information to the employee.  34 Tex. Admin. Code § 3.10(c). 

6. The taxpayer’s evidence must demonstrate the substance of the information or advice and that it was communicated directly to the taxpayer in a private letter ruling; that the taxpayer followed the information or advice; that the taxpayer gave sufficient information to have resulted in correct advice and did not misrepresent information, or withhold or conceal information that would affect the advice; and the taxpayer has suffered, or will suffer, harm based on the erroneous advice unless the Comptroller provides the requested relief.  34 Tex. Admin. Code § 3.10(c)(1). 

7. Petitioner is presumed to know the law as it relates to its business and is responsible for compliance.  See Comptroller’s Decision No. 43,681 (2004). 

8. A ready mix concrete contractor must collect and remit the tax due on the concrete produced and consumed, and the tax rate in effect at the job site location is applied to the greater of the actual invoice price of the component materials or the fair market value of the concrete incorporated into the project.  34 Tex. Admin. Code § 3.291(b)(3)(E); see also § 3.334(k)(8), (9). 

9. Petitioner did not establish a basis for detrimental reliance relief. 

10. Petitioner has the burden of proof by a preponderance of the evidence to show that the audit was erroneous.  34 Tex. Admin. Code § 1.26(e). 

11. Petitioner did not prove by a preponderance of the evidence that the audit as it relates to local tax due was erroneous. 

12. The audit assessment should be affirmed in its entirety. 

SIGNED March 24, 2020.

JENNY BURLESON
ADMINISTRATIVE LAW JUDGE
STATE OFFICE OF ADMINISTRATIVE HEARINGS

 

 

 

ENDNOTES:

[1] The date calculated is 25 days after this decision is signed. See APA, Tex. Gov’t Code § 2001.146(a); S.B. 1095, Acts 2017, 85th Leg.   For additional guidance, refer to the Frequently Asked Questions Related to Motions for Rehearing, found here: http://comptroller.texas.gov/taxes/publications/96-1789.pdf

[2] See Tex. Tax Code § 111.0081(c).

[3] 34 Texas Administrative Code § 3.10 was amended in 2013 to add the requirement that the writing be in accordance with § 3.1 (Private Letter Rulings and General Information Letters).  Section 3.1 was added in 2013. 

ACCESSION NUMBER: 202004017H
SUPERSEDED: N
DOCUMENT TYPE: H
DATE: 2020-04-29
TAX TYPE: SALES

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