Texas Sampling Bibliography

Texas Tax Code

• Texas Tax Code, §111.0042(b) ; describes conditions where sampling auditing methods are appropriate. Subsection (c) requires notice to taxpayer of the sampling procedures to be used. Subsection (d) allows an error to be scheduled separately and excluded from the projection if the taxpayer can show that error is the result of an unusual transaction that is not representative of the taxpayer's normal operations. Subsection (e) requires the Comptroller to use "generally recognized sampling techniques").
• Texas Administrative Code Title 34, Section 3.282.

• Audit Division manuals and documents may be requested in writing from Alice Kelley, Administrative Assistant, Audit Division, PO Box 13528, Austin, Texas 78711-9939. Phone (512) 463-3900. Fax (512) 475-0349.
• AUDITING FUNDAMENTALS: A SALES TAX REFERNCE MANUAL (1992). <http://www.window.state.tx.us/taxinfo/audit/auditfun/preface.htm>
• Auditing Manuals - index on the web <http://www.window.state.tx.us/taxinfo/audit/auditman.htm>
• Audit Memo 1491 (June 12, 1991). (Summarizes guidelines on sampling under Statement of Auditing Standards Number 39 (SAS 39) as adapted from a Journal of Accountancy article published in May 1991).
• Audit Memo 1494 (July 3, 1991). (Summarizes American Institute of CPAs guidelines for non-statistical sampling).
• Audit Memo 1685 (November 1, 1994). (This audit memo followed the Comptroller's settlement of the Texas Instruments district court case in 1994. The memo specifies conditions under which tax overpayments may be included in a sample and projection).
• Audit Memo 1719 (May 9, 1995). (Specifies procedures for sales and use tax refunds including refund requests based on samples and projections).
• Audit Memo 1762 (February 22, 1996). (Provides guidelines for stratification procedures for computer assisted audit management system (CAMS) audits. Recommends of a minimum sample of 100 items per strata. Implies auditors can use their own judgment in selecting sample size).
• Audit Memo 1770 (April 4, 1996). (Provides guidelines on how taxpayers may obtain copies of their computer data files from the CAMS group in the Audit Division).
• Audit Sampling Training and Development Course (revised June 2003)

• Some of these decisions are summarized in State Tax Notes. Many of these decisions can be found in redacted form on the Comptroller's State Tax Automated Research (STAR) System.
• Comptroller Decision No. 24,582, (1992). (During a sales and use tax audit, two specific groups of invoices were misfiled or lost. One of the groups was later discovered, and was found to have the same error rate as the rest of the exam. The ALJ held the tax should be assessed based on the overall rates established by the auditor, rather than assuming a 100% error rate for missing invoices).
• Comptroller Decision No. 30,010A, STAR System Document 9703754H, (second rehearing, March 14, 1997). (Taxpayer could not locate 110 purchase invoices out of 3,450 requested by auditor. Taxpayer contended that the tax rate from the overall sample should be applied to the missing invoices in accordance with Decision No. 24,582. ALJ held that Decision No. 24,582 involved unique and compelling circumstances not found in the present case. ALJ affirmed the Comptroller's practice of treating all missing invoices as taxable).
• Comptroller Decision No. 32,318, 98 STN 30-40, (December 17, 1997). (Taxpayer argued Comptroller's methodology did not follow generally recognized sampling techniques because the Comptroller's computation of the error percentage in the sample included credits when calculating the denominator and excluded credits when calculating the numerator. Taxpayer argued that procedure's effect is to increase the fraction by which the error percentage is determined and thereby increase tax liability. The ALJ denied taxpayer's contention on this issue and upheld the Comptroller).
• Comptroller Decision No. 33,750, 98 STN 11-44, (December 2, 1997), (Taxpayer argued that when sampling and projection techniques are employed in a Texas sales and use tax audit, the records reflecting erroneously over-accrued tax must be included in the population to properly determine the taxpayer's liability. ALJ held that since the taxpayer was a direct-pay permit holder, the Comptroller's Tax Division was not required to examine taxpayer's tax-accrued vouchers to look for errors. The Tax Division would have allowed the taxpayer to use sample and projection methods to project a tax credit, but the ALJ found the taxpayer had not produced any evidence to show that over-accruals occurred during the current audit period).
• Comptroller Decision No. 34,519 (July 8, 1997). (ALJ held taxpayer failed to provide sufficient evidence that the asset purchases sampled by the auditor were not representative of the population).

• Baker v. Bullock, 529 S.W. 2d 279 (Texas Court of Appeals - Austin Division, 1975). (Court held taxpayer's vague allegations were insufficient to establish the auditor's method was incorrect or inapplicable).
• Bullock v. Foley Brothers Dry Goods Corporation, 802 S.W. 2d 835 (Texas Court of Appeals - Austin Division, 1990, rehearing overruled, 1991). (Court held that taxpayer failed to show the auditor used invalid sampling techniques).
• Hylton v. State of Texas, 665 S.W. 2d 571 (Texas Court of Appeals - Austin Division, 1984). ( Court held taxpayer failed to present a preponderance of evidence that the auditor's determination was incorrect).
• Texas Instruments v. Sharp, Texas 345th District Court, Cause No. 91-2823. (1994). (Taxpayer sought to include vendor overpayments discovered in the sample projected into audit population. The Comptroller settled the case in the taxpayer's favor and issued Audit Memo 1685 describing when overpayments could be projected).