By: Ratliff S.B. No. 1319 A BILL TO BE ENTITLED AN ACT 1-1 relating to procedures for tax auditing and collection. 1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-3 SECTION 1. Subchapter B, Chapter 151, Tax Code, is amended 1-4 by adding Section 151.0231 to read as follows: 1-5 Sec. 151.0231. MANAGED AUDITS. (a) In this section, 1-6 "managed audit" means a review and analysis of invoices, checks, 1-7 accounting records, or other documents or information to determine 1-8 a taxpayer's liability for tax under this chapter. 1-9 (b) A managed audit may be limited to certain categories of 1-10 liability under this chapter, including tax on: 1-11 (1) sales of one or more types of taxable items; 1-12 (2) purchases of assets; 1-13 (3) purchases of expense items; 1-14 (4) purchases under a direct payment permit; or 1-15 (5) any other category specified in an agreement 1-16 authorized by this section. 1-17 (c) The comptroller may, in a written agreement, authorize a 1-18 taxpayer to conduct a managed audit under this section. The 1-19 agreement must: 1-20 (1) be signed by an authorized representative of the 1-21 comptroller and the taxpayer; and 1-22 (2) specify the period to be audited and the procedure 1-23 to be followed. 1-24 (d) In determining whether to authorize a managed audit, the 2-1 comptroller may consider, in addition to other factors the 2-2 comptroller considers relevant: 2-3 (1) the taxpayer's history of tax compliance; 2-4 (2) the amount of time and resources the taxpayer has 2-5 available to dedicate to the audit; 2-6 (3) the extent and availability of the taxpayer's 2-7 records; and 2-8 (4) the taxpayer's ability to pay any expected 2-9 liability. 2-10 (e) The decision to authorize or not authorize a managed 2-11 audit rests solely with the comptroller. 2-12 (f) The comptroller may examine records and perform reviews 2-13 that the comptroller determines are necessary before the audit is 2-14 finalized to verify the results of the audit. 2-15 (g) Unless the audit or information reviewed by the 2-16 comptroller under Subsection (f) discloses fraud or wilful evasion 2-17 of the tax, the comptroller may not assess a penalty and may waive 2-18 all or part of the interest that would otherwise accrue on any 2-19 amount identified to be due in a managed audit. This subsection 2-20 does not apply to any amount collected by the taxpayer that was a 2-21 tax or represented to be a tax but that was not remitted to this 2-22 state. 2-23 (h) Except as provided by Section 111.104(f), the taxpayer 2-24 is entitled to a refund of any tax overpayment disclosed by a 2-25 managed audit under this section. 2-26 SECTION 2. Subchapter I, Chapter 151, Tax Code, is amended 3-1 by adding Section 151.4171 to read as follows: 3-2 Sec. 151.4171. OPTIONAL REPORTING METHOD: PERCENTAGE-BASED. 3-3 (a) In this section, "percentage-based reporting method" means a 3-4 method by which a taxpayer categorizes purchase transactions 3-5 according to standards specified in the letter of authorization, 3-6 reviews an agreed-on sample of invoices in that category to 3-7 determine the percentage of taxable transactions, and uses that 3-8 percentage to calculate the amount of tax to be reported. 3-9 (b) The comptroller may authorize the holder of a direct 3-10 payment permit to use a percentage-based reporting method. The 3-11 authorized percentage must be used for a three-year period 3-12 specified by the comptroller, unless the authorization is revoked 3-13 by the comptroller. 3-14 (c) The comptroller may revoke the authorization to report 3-15 under this section if the comptroller determines that the 3-16 percentage being used is no longer representative because of a 3-17 change: 3-18 (1) in law, including a change in the interpretation 3-19 of a law or rule; or 3-20 (2) in the taxpayer's business operations. 3-21 (d) The decision of the comptroller to deny or revoke 3-22 authorization under this section is not appealable. 3-23 (e) In deciding whether to authorize reporting under this 3-24 section, the comptroller may categorize transactions by dollar 3-25 amount, by type of taxable item purchased, by the purpose for which 3-26 the taxable item will be used, or by other standards appropriate to 4-1 the taxpayer's operations. 4-2 (f) The comptroller by rule may specify additional 4-3 procedures that must be followed and conditions that must be met 4-4 before the comptroller authorizes a taxpayer to report under this 4-5 section. 4-6 SECTION 3. Subchapter I, Chapter 151, Tax Code, is amended 4-7 by adding Section 151.430 to read as follows: 4-8 Sec. 151.430. DETERMINATION OF OVERPAID AMOUNTS. (a) This 4-9 section applies to the tax on purchases paid by a person holding a 4-10 permit under this chapter who has purchased taxable items for use 4-11 in this state and has remitted tax on those items in error to this 4-12 state or has paid tax on those items in error to a retailer holding 4-13 a permit under this chapter. 4-14 (b) A person to whom this section applies may compute the 4-15 amount of overpayment by use of a projection based on a sampling of 4-16 transactions. The sampling method used must comply with generally 4-17 accepted sampling methods as approved by the comptroller. 4-18 (c) The person may obtain reimbursement for amounts 4-19 determined to have been overpaid by taking a credit on one or more 4-20 sales tax returns or by filing a claim for refund with the 4-21 comptroller within the limitation period specified by Subchapter D, 4-22 Chapter 111. 4-23 (d) The person must record the method by which the 4-24 projection and computation were performed and must make available 4-25 on request by the comptroller the records on which the projection 4-26 and computation were based. 5-1 (e) The comptroller may adopt rules specifying additional 5-2 procedures that must be followed in connection with claiming a 5-3 credit under this section. 5-4 SECTION 4. This Act takes effect October 1, 1999. 5-5 SECTION 5. The importance of this legislation and the 5-6 crowded condition of the calendars in both houses create an 5-7 emergency and an imperative public necessity that the 5-8 constitutional rule requiring bills to be read on three several 5-9 days in each house be suspended, and this rule is hereby suspended.