Texas Tax Roundup ' July 2022

• Published date: 09 August 2022
• Subject Matter: Government, Public Sector, Tax, Constitutional & Administrative Law, Income Tax, Tax Authorities
• Law Firm: Freeman Law
• Author: Mr TL Fahring

Aloha! It's summer doldrums round here at Texas Tax Roundup this month. Everybody in Texas tax world must be off on vacation in some tropical paradise somewhere where it's not too hot and the Mai Tais flow more abundantly than our more circumspect mixed beverages back home.

Except for me and them administrative law judges, apparently. Let's see what they have to say.

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

General

Burden of proof/Detrimental Reliance/Insolvency

Comptroller's Decision No. 115,242 (2022)'The administrative law judge ("ALJ") upheld a sales and use tax assessment against a taxpayer that operated an advertising agency when the taxpayer didn't provide documentation showing that the assessment was incorrect.¹ The administrative law judge also determined that the taxpayer couldn't rely on advice that it was purportedly provided during a previous audit, because such advice wasn't in the form of a private letter ruling.² Finally, the administrative law judge found that the taxpayer hadn't provided all of the documentation required for an insolvency settlement.³

Hotel Occupancy Tax

Estimated Audits

Comptroller's Decision No. 118,352 (2022)'The ALJ found that when a taxpayer failed to provide complete records to the auditor, an audit estimating tax based on the taxpayer's hotel occupancy tax history, sales and use tax returns, and franchise tax reports was valid.⁴

Franchise Tax

Total Revenue

Comptroller's Decision Nos. 117,954, 117,955, and 117,956 (2022)'The ALJ ruled that a taxpayer failed to demonstrate that its reporting of income from long-term contracts on its federal income tax returns complied with federal tax law and, therefore, that the taxpayer hadn't established that its amended franchise tax returns were properly calculated.

Comptroller's Decision Nos. 117,086 and 117,087 (2022)'The ALJ found that a taxpayer had not established that its revenue should be reduced by the exclusion of income from uniform replacement charges under a reimbursement theory.⁵

Cost of Goods Sold

Comptroller's Decision No. 110,947 (2022)'The ALJ found that a taxpayer that primarily installed parts that it purchased into aircraft that it didn't own wasn't entitled to deduct labor costs associated with such installation as cost of goods sold.⁶

Comptroller's Decision No. 118,267 (2022)'The ALJ ruled that a taxpayer engaged in the business of building and selling houses could only include costs and fees that it paid while it owned the properties in its cost of goods sold deduction.⁷ Such costs and fees paid after the houses were sold could not be deducted.

Forfeiture of Corporate Privileges

Comptroller's Decision No...