Texas Use Tax Audit
A Texas Use Tax Audit normally begins by the initiation of a letter to the business owner. This can also become part of an ongoing sales tax audit where the State begins to audit your consummables. In most cases, the problem begins where a business owners purchases their supplies from out of state vendors. When the out of state vendor does not charge sales tax to the Texas based business owner, the Texas based business owner must pay use tax to the state of Texas. For example, if you are a convenience store owner that just purchased a freezer from New York, then you will pay use tax to the State of Texas on that purchase.
There is no obligation for an out-of-state vendor to charge Texas sales tax on products sold to residents of Illinois when the vendor does not have a nexus to Texas. Basically, the vendor ships from their place of business from an out of state location.
If an item is placed in a rental inventory, it has been purchased for rental purposes and Use Tax is due. “Rental inventory” means that the owner, in order to state his intended use of the property as rental property, has recorded the property in his books and records as rental property in accordance with generally accepted accounting principles. Depreciation of property used for rental purposes demonstrates an intent to include that property in rental inventory.
Mansoor Ansari J.D., LL.M. (TAX)
281-606-0055
Texas Use Tax Audit
