1-1 By: Ratliff S.B. No. 1319 1-2 (In the Senate - Filed March 11, 1999; March 15, 1999, read 1-3 first time and referred to Committee on Finance; March 31, 1999, 1-4 reported adversely, with favorable Committee Substitute by the 1-5 following vote: Yeas 11, Nays 0; March 31, 1999, sent to printer.) 1-6 COMMITTEE SUBSTITUTE FOR S.B. No. 1319 By: Ratliff 1-7 A BILL TO BE ENTITLED 1-8 AN ACT 1-9 relating to procedures for tax auditing and collection. 1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-11 SECTION 1. Subchapter B, Chapter 151, Tax Code, is amended 1-12 by adding Section 151.0231 to read as follows: 1-13 Sec. 151.0231. MANAGED AUDITS. (a) In this section, 1-14 "managed audit" means a review and analysis of invoices, checks, 1-15 accounting records, or other documents or information to determine 1-16 a taxpayer's liability for tax under this chapter. 1-17 (b) A managed audit may be limited to certain categories of 1-18 liability under this chapter, including tax on: 1-19 (1) sales of one or more types of taxable items; 1-20 (2) purchases of assets; 1-21 (3) purchases of expense items; 1-22 (4) purchases under a direct payment permit; or 1-23 (5) any other category specified in an agreement 1-24 authorized by this section. 1-25 (c) The comptroller may, in a written agreement, authorize a 1-26 taxpayer to conduct a managed audit under this section. The 1-27 agreement must: 1-28 (1) be signed by an authorized representative of the 1-29 comptroller and the taxpayer; and 1-30 (2) specify the period to be audited and the procedure 1-31 to be followed. 1-32 (d) In determining whether to authorize a managed audit, the 1-33 comptroller may consider, in addition to other factors the 1-34 comptroller considers relevant: 1-35 (1) the taxpayer's history of tax compliance; 1-36 (2) the amount of time and resources the taxpayer has 1-37 available to dedicate to the audit; 1-38 (3) the extent and availability of the taxpayer's 1-39 records; and 1-40 (4) the taxpayer's ability to pay any expected 1-41 liability. 1-42 (e) The decision to authorize or not authorize a managed 1-43 audit rests solely with the comptroller. 1-44 (f) The comptroller may examine records and perform reviews 1-45 that the comptroller determines are necessary before the audit is 1-46 finalized to verify the results of the audit. 1-47 (g) Unless the audit or information reviewed by the 1-48 comptroller under Subsection (f) discloses fraud or wilful evasion 1-49 of the tax, the comptroller may not assess a penalty and may waive 1-50 all or part of the interest that would otherwise accrue on any 1-51 amount identified to be due in a managed audit. This subsection 1-52 does not apply to any amount collected by the taxpayer that was a 1-53 tax or represented to be a tax but that was not remitted to this 1-54 state. 1-55 (h) Except as provided by Section 111.104(f), the taxpayer 1-56 is entitled to a refund of any tax overpayment disclosed by a 1-57 managed audit under this section. 1-58 SECTION 2. Subchapter I, Chapter 151, Tax Code, is amended 1-59 by adding Section 151.4171 to read as follows: 1-60 Sec. 151.4171. OPTIONAL REPORTING METHOD: PERCENTAGE-BASED. 1-61 (a) In this section, "percentage-based reporting method" means a 1-62 method by which a taxpayer categorizes purchase transactions 1-63 according to standards specified in the letter of authorization, 1-64 reviews an agreed-on sample of invoices in that category to 2-1 determine the percentage of taxable transactions, and uses that 2-2 percentage to calculate the amount of tax to be reported. 2-3 (b) The comptroller may authorize the holder of a direct 2-4 payment permit to use a percentage-based reporting method. The 2-5 authorized percentage must be used for a three-year period 2-6 specified by the comptroller, unless the authorization is revoked 2-7 by the comptroller. 2-8 (c) The comptroller may revoke the authorization to report 2-9 under this section if the comptroller determines that the 2-10 percentage being used is no longer representative because of a 2-11 change: 2-12 (1) in law, including a change in the interpretation 2-13 of a law or rule; or 2-14 (2) in the taxpayer's business operations. 2-15 (d) The decision of the comptroller to deny or revoke 2-16 authorization under this section is not appealable. 2-17 (e) In deciding whether to authorize reporting under this 2-18 section, the comptroller may categorize transactions by dollar 2-19 amount, by type of taxable item purchased, by the purpose for which 2-20 the taxable item will be used, or by other standards appropriate to 2-21 the taxpayer's operations. 2-22 (f) The comptroller by rule may specify additional 2-23 procedures that must be followed and conditions that must be met 2-24 before the comptroller authorizes a taxpayer to report under this 2-25 section. 2-26 SECTION 3. Subchapter I, Chapter 151, Tax Code, is amended 2-27 by adding Section 151.430 to read as follows: 2-28 Sec. 151.430. DETERMINATION OF OVERPAID AMOUNTS. (a) This 2-29 section applies to the tax on purchases paid by a person holding a 2-30 permit under this chapter who has purchased taxable items for use 2-31 in this state and has remitted tax on those items in error to this 2-32 state or has paid tax on those items in error to a retailer holding 2-33 a permit under this chapter. 2-34 (b) A person to whom this section applies may compute the 2-35 amount of overpayment by use of a projection based on a sampling of 2-36 transactions. The sampling method used must comply with generally 2-37 accepted sampling methods as approved by the comptroller. 2-38 (c) The person may obtain reimbursement for amounts 2-39 determined to have been overpaid by taking a credit on one or more 2-40 sales tax returns or by filing a claim for refund with the 2-41 comptroller within the limitation period specified by Subchapter D, 2-42 Chapter 111. 2-43 (d) The person must record the method by which the 2-44 projection and computation were performed and must make available 2-45 on request by the comptroller the records on which the projection 2-46 and computation were based. 2-47 (e) The comptroller may adopt rules specifying additional 2-48 procedures that must be followed in connection with claiming a 2-49 credit under this section. 2-50 SECTION 4. This Act takes effect October 1, 1999. 2-51 SECTION 5. The importance of this legislation and the 2-52 crowded condition of the calendars in both houses create an 2-53 emergency and an imperative public necessity that the 2-54 constitutional rule requiring bills to be read on three several 2-55 days in each house be suspended, and this rule is hereby suspended. 2-56 * * * * *