Short review of the new documents on STARS. All linked below.
https://star.comptroller.texas.gov/view/202407033H
There's an important distinction made in the Proposal for Decision that may be unknown to less experienced practictioners.
Petitioner filed a letter, received on April 25, 2024, stating that she sent documents to SOAH on April 11, 2024, and included a mailing receipt. However, the Order extending the time to eFile exhibits admitted at the hearing specified that any documents were “to be received by SOAH no later than April 15, 2024.” Petitioner’s documents were not received until April 16, 2024, after the record closed. (...)
This is a procedural note for both the broader administrative process within audit, as well as the administrative procedure for SAOH. There are rules of procedure that must be followed, which includes the submission of documents. RULE §155.101 Filing Documents
(b)(2)(C) Time of filing for documents not filed electronically. With respect to documents filed by mail, fax, or hand-delivery, the time and date of filing shall be determined by the file stamp affixed by SOAH. Documents received after 5:00 p.m. or when SOAH is closed shall be deemed filed the next business day.
Very specifically, when mailed documents are received, to a certain extent, is at the discretion of the SOAH mail room, and since received date is the driving factor, generally electronic delivery or hand delivered by courier are the most appropriate avenues to present documents to SOAH, otherwise critical information may be denied, such as in this case.
The case itself is another bar depletion analysis estimate with fraud penalty. One interesting note of practical interest, the judge claims that the auditor took additional COVID related spoilage into consideration for the estimate. 81.81% error rate is substantial.
https://star.comptroller.texas.gov/view/202408018H
A full service bar depletion analysis estimate. Interestingly, the auditor did use the general ledger for one of the years, 2018, which is a bit unusual for this sort of situation.
What is also procedurally unusual is:
The auditor used Petitioner’s federal income tax return to identify accounts of interest, including landscaping, office supplies, other office expenses, glass and serving ware, and equipment rental. The auditor scheduled transactions from the general ledger details for 2018 and 2019. The auditor scheduled taxable expense purchases in Exam 500 based on the description of the purchases in the available documentation and the absence of purchase invoices or other documentation showing that Petitioner paid tax to the vendor for the purchases or accrued tax to remit it to the Comptroller.
Generally these sorts of assessments don't occur in estimates, and may be one of the situations where not providing any records to an auditor lead to a worse result.
In the analysis, the judge states:
Petitioner disagrees with the results of the audits, contending that they do not account for inventory losses sustained from Hurricane Harvey, inventory used for cooking, periods when the business was closed, complimentary drinks to patrons and employees, loss of records due to fire, theft, and charitable donations. However, Petitioner has not provided any source records to support its contentions.
Insurance records, charitable donation records may have been able to found with sufficient diligience, though it would likely still take some effort to get the 58% error rate to a non-fraud error rate.
https://star.comptroller.texas.gov/view/202410022H
Another full service bar, with a 62.5% error rate. Nothing unusual in this one, but should give a sense of what the Comptroller is happy to take to the ALJ - estimated audits with no records.
https://star.comptroller.texas.gov/view/202410006L
This is a PLR responding just over 2 years after the initial request.
This is a two part clarification on whether a manufacturer's extended warranty-like process more fits in the extended warranty bucket (taxable) or the manufacturer warranty bucket (nontaxable). Both of which can be found in Rule 3.292 Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property.
There's also a clarification that the dealer is acting as a marketplace provider, which is odd. Generally when they are using 'marketplace provided' they are refering to Amazon and the like, as seen in this publication. https://comptroller.texas.gov/taxes/sales/marketplace-providers-sellers.php. There may be some key facts not being conveyed on this specific issue, otherwise this seems like a departure, possibly an expansion, of the use of this term to cover more traditional commercial entities. Something to keep an eye on.
https://star.comptroller.texas.gov/view/202410005L
A PLR with a 9 month turn around.
This is the Dairy Queen Blizzard Collar letter. I won't comment much much on this, beyond I think this is faulty logic by Tax Policy and would be happy to see this challenged.
See the following video https://www.youtube.com/watch?v=6_4dJpZbO9k - At 20 seconds the collar is attached to the cup to help create the food product, and not spill or otherwise contaminate the workzone. For whatever reason this is a hand tool, quoting the administrative code.
Section 151.318(c)(2). A hand tool is defined as an instrument used, managed, and powered by the hand.
I believe this is a application. As seen clearly in the video, it is not particularly used or powered by hand, as no work is being done through the object. There is already a term for this: a consumable.
Further it appears the items act in compliance with RULE §229.221 Equipment and Utensils rather than the mentioned 25 Texas Administrative Code, Section 229.219(d) which speaks to general operation, rather than actual items used.
Now that there is a policy document however, it narrows the possiblity of these collars being nontaxable in the future, requiring either a change of policy (unlikely,) an act of legislation (unlikely,) or the issue being taken into district court.
https://star.comptroller.texas.gov/view/202410020H
Self Represented. Garbage collection tax issues. Interestingly, it looks like they found some success. They believed the assesment was too large, presented an amended federal tax return (that likely showed lower sales) and the Comptroller agreed to amend the results to reflect the return. Not sure why this needed to go in front of a judge.
https://star.comptroller.texas.gov/view/202410007L
A PLR with an 8 month turn around.
Another marketplace provider question along with data processing. It's an interesting look at what the Comptroller plainly says is taxable data processing and makes no attempt to even footnote that some of the service being provided may be nontaxable.
https://star.comptroller.texas.gov/view/202410018H
Self Represented. Janitorial Services. Nothing of note, the only petitioner claim noted was a waiver requested was of interest, which was denied.
https://star.comptroller.texas.gov/view/202410023L
PLR with a 6 month turn around.
This seems an issue where tax policy has undermined statute in order to get a desired taxable result and meaningful does not fully contemplate the fact pattern provided by the taxpayer. Further, it's basis, https://star.comptroller.texas.gov/view/200204922L, seems to be missing the essence of the transaction doctrine that has been more prominently used more recently though it seems to countermand it.
The prior language:
Taxpayer is providing a taxable service when it charges a fee for the two parking spaces; therefore, the entire fee should be taxable. Taxpayer's attempt after the fact to break out the fee into two components does not change the taxability of the service. What you have to look at is the item that is being provided and purchased by the two parties - i.e., the essence of the transaction between Taxpayer and Purchaser. It is parking service.
To current language:
The rental of a parking facility, such as the LOCATION garages, is presumed to be taxable under Rule 3.315(h). A parking facility rented or leased for a purpose other than parking is not taxable, for example, a parking facility leased or rented to accommodate a flea market. See Rule 3.315(h)(1).
The former does not acknowledge the substance and use of what is bargained for. The law of the land is not that services are taxable unless otherwise exempted. In Texas, the service defaulting to nontaxable is the standard, where only certain enumerated services are taxable under 151.0101.
Further, the tax authority cited https://star.comptroller.texas.gov/view/8801L0864F10 from nearly 40 years ago does not even present a fact pattern that seems congruent, nor does it provide the original question to even see how tax policy made it's current determination.
In my opinion, I would doubt this could hold up to scrutiny. A tangential policy letter is at odds with a plain text reading of the statute is extremely questionable, though likely the issue is so small that it won't see further investigation and a small taxpayer will remit more tax than the law truly requires.
https://star.comptroller.texas.gov/view/202410012N
Mundane exemption situation.
https://star.comptroller.texas.gov/view/202410008N
Presenting the key section without further comment:
The taxpayer also enters into a referral agreement with a credit card processor to promote the processor’s services to the taxpayer’s clients that accept credit cards as payment for goods and services. The taxpayer receives a residual fee from the credit card processor for each accepted merchant whose merchant’s agreement was submitted by the taxpayer. The residual fee is a percentage of the processor’s income from fees charged to merchants after subtracting the processor’s costs.
The Comptroller’s office determined that the taxpayer’s service is not taxable. The residual fee compensates the taxpayer for promoting the processor’s services and submitting executed merchant agreements.
https://star.comptroller.texas.gov/view/202410010N
Membership consulting and training. Deemed taxable due to a single fee being charged for consulting and materials, with the materials apparently being considered sufficient value to poison the entire transaction with tax.
https://star.comptroller.texas.gov/view/202410010N
More bad data processing policy fall out. No further comment.
https://star.comptroller.texas.gov/view/202410013N
Beyond the scope of my professional concern.
https://star.comptroller.texas.gov/view/202410009N
Interesting to see the tax office taking a permissive attitude to the railroad industry. I jest. Below is the useful excerpt.
Items such as sub-ballast, riprap, and steel and precast culverts used in the construction of railroad tracks or roadbeds are therefore exempt from Texas sales and use tax.
https://star.comptroller.texas.gov/view/202410014N
Beyond the scope of my professional concern.
https://star.comptroller.texas.gov/view/202411001P
An update to the successor liability publication, found https://comptroller.texas.gov/taxes/publications/98-117.php.
