Texas – Incorrect Information on the Comptroller’s Website Results in Dismissal of Assessment

SALT Report 1976 – A Texas Administrative Law Judge issued a ruling regarding an assessment against a Taxpayer for failure to collect and remit special district taxes.  In 2011, the Comptroller’s office discovered that the Taxpayer was required to collect a County Emergency Services District tax and had failed to do so from 2009 through 2011. The Comptroller’s office recalculated the amount of tax due on the Taxpayer’s sales tax returns and issued an assessment for underpaid taxes. The Taxpayer appealed.

In its appeal the Taxpayer claimed that the assessments should be dismissed because he had relied on the Comptroller’s Tax Rate Locator and WebFile websites to determine whether its business was within the special purpose district’s jurisdiction.

The State’s Tax Rate Locator allows Taxpayers to enter a business address to determine which taxing jurisdictions apply to that particular business. The Taxpayer in this case correctly entered its business address, and the website indicated state and county taxes, but not the SPD tax. Therefore, the Taxpayer collected and remitted taxes using the rate provided by the system and filed its sales tax returns using the Comptroller’s online WebFile system, which repeated the same rate error.

In situations like this the State enacts its detrimental reliance policy which offers relief if the Taxpayer can establish the following:

  • That erroneous advice was given,
  • That the Taxpayer gave sufficient information to enable the employee to provide correct advice,
  • That the Taxpayer followed the advice, and
  • That the Taxpayer has suffered or will suffer harm unless the Comptroller adheres to the advice

In its decision the ALJ determined that detrimental reliance relief was warranted because the assessment resulted from the failure of the Comptroller’s Tax Rate Locator and WebFile systems to indicate that the Taxpayer was within the SPD’s jurisdiction.

Further, although there is a disclaimer on the website that warns Taxpayers not to rely on the Tax Rate Locator to identify specific tax liabilities or the tax rate for a certain transaction, the fact that the Comptroller directs Taxpayers to visit the site to determine “which taxing jurisdictions apply” indicates that Taxpayers should be able to rely on the website to correctly identify the local tax jurisdictions that apply at the address entered.  Therefore, the Taxpayer was granted relief and the assessment was dismissed.

For Further Information:

Texas Comptroller of Public Accounts – Decision, Hearing No. 107,153