|
|
SOAH DOCKET NO. 304-22-0860.70
CPA HEARING NO. 116,846
RE: **************
TAXPAYER NO: **************
AUDIT OFFICE: **************
AUDIT PERIOD: September 1, 2013 THROUGH December 31, 2017
Sel Fin -Mot Veh Sls/RDT
BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS
GLENN HEGAR
Texas Comptroller of Public Accounts
PERRY HEITMAN
Representing Respondent
**************
Representing Petitioner
COMPTROLLER’S DECISION
This decision is considered final on May 17, 2022, unless a motion for rehearing is timely filed; this date of finality is calculated based on the Administrative Procedure Act (APA).[1] The failure to timely file a motion for rehearing may result in adverse legal consequences.
Administrative Law Judge (ALJ) Kathy Pickup of the State Office of Administrative Hearings (SOAH) issued a Proposal for Decision (PFD) that includes Findings of Fact and Conclusions of Law. SOAH served the PFD on each party and each party was given an opportunity to file exceptions and replies with SOAH in accordance with SOAH’s rules of procedure. The ALJ recommended that the Comptroller adopt the PFD as written.
After review and consideration, IT IS ORDERED that the PFD is adopted as changed.[2]
The result from this Decision is Attachment A. The ALJ’s letter to the Comptroller is Attachment B. The PFD as changed is Attachment C. Attachments A, B, and C are incorporated by reference.
Attachment A reflects a liability.[3]
The total sum of the tax, penalty, and interest is due and payable 20 days after a comptroller’s decision becomes final.[4] If such sum is not timely paid, an additional penalty of 10 percent of the taxes due will accrue.
SIGNED on this 22nd day of April 2022.
GLENN HEGAR
Comptroller of Public Accounts
By: Lisa Craven
Deputy Comptroller
Attachment A, Texas Notification of Hearing Results
Attachment B, ALJ’s letter to the Comptroller
Attachment C, Proposal for Decision as changed
ATTACHMENT B
State Office of Administrative Hearings
Kristofer Monson
Chief Administrative Law Judge
April 11, 2022
The Honorable Glenn Hegar
Comptroller of Public Accounts
LBJ Building
111 E. 17th Street, 1st Floor
Austin, TX 78701
RE: SOAH Docket: 304-22.0860.70
TCPA Hearing No.: 116,846
Taxpayer No.: **************
************** v. Texas Comptroller of Public Accounts
Dear Comptroller Hegar:
On April 5, 2022, Petitioner filed exceptions to the Proposal for Decision (PFD) issued on March 22, 2022, in the above-referenced matter. The Tax Division (Staff) of the Texas Comptroller of Public Accounts (Comptroller) filed a response on April 6, 2022.
Petitioner’s exceptions reassert arguments made in the hearing. Having reviewed the filings of the parties and finding no errors in the findings of fact or conclusions of law, I recommend that the PFD be adopted as written.
Sincerely,
Kathy Pickup
Administrative Law Judge
ATTACHMENT C
SOAH DOCKET NO. 304-22-0860.70
TCPA DOCKET NO. 116,846
**************
Taxpayer No. **************
v.
TEXAS COMPTROLLER OF PUBLIC ACCOUNTS
BEFORE THE STATE OFFICE OF ADMINISTRATIVE HEARINGS
PROPOSAL FOR DECISION
The Tax Division (Staff) of the Texas Comptroller of Public Accounts (Comptroller) audited ************** (Petitioner) for compliance with motor vehicle sales and use tax and made an assessment that included tax, 10% late penalty, 50% fraud penalty, and accrued interest. Petitioner contends that the standard presumptive value (“SPV”) used in the audit is improperly applied because she did not own or sell certain vehicles assessed in the audit, and that the application of SPVs is improper because she is a motor vehicle dealer and SPVs apply only to private party sales. Petitioner also contends that the additional 50% penalty should be waived. Staff agreed to partial interest waiver, but contends no other adjustments are warranted. In this Proposal for Decision, the Administrative Law Judge (ALJ) recommends that the assessment be affirmed, except as agreed by Staff.
I. PROCEDURAL HISTORY, NOTICE, AND JURISDICTION
Staff referred this case to the State Office of Administrative Hearings (SOAH) and, on December 15, 2021, issued a Notice of Hearing by Written Submission. On December 21, 2021, ALJ Kathy Pickup issued Order No. 1, which set the written submission hearing. Perry S. Heitman represented Staff, and Petitioner was represented by ************** of COMPANY. The contested case record closed on March 21, 2022.
There are no issues of notice or jurisdiction; therefore, those matters are set out in the Findings of Fact and Conclusions of Law without further discussion.
II. REASONS FOR DECISION
A. Evidence
Staff submitted the pleadings the parties exchanged prior to referring the case to SOAH and provided the following exhibits:
1. Sixty-Day Letter;
2. Texas Notification of Audit Results;
3. Penalty and Interest Waiver Worksheet;
4. Audit Report;
5. Audit Plan; and
6. Tax Return and Payment Documentation.
Petitioner submitted the following exhibits, attached to its pleadings:
1. Private-Party Purchases and Standard Presumptive Values, Texas Comptroller Publication, November 2020;
2. Motor Vehicle Sales, Use and Rental Tax, Publication #96-116, Revised March 2009; and
3. Texas Comptroller Audit Division’s Motor Vehicle Tax Manual, December 2017, Page 13.
B. Agreed Adjustments
Staff agreed to waive accrued interest from March 1, 2021, through November 30, 2021.
C. Facts Demonstrated by the Evidence
During the period at issue, Petitioner owned and operated a used car dealership in CITY, Texas and was permitted for seller-financed motor vehicle sales tax. She was involved in the day-to-day operations of the business, including signing the sales tax returns and the checks that accompanied those returns. In April 2018, Staff initiated a motor vehicle sales tax compliance audit for the period September 1, 2013, through December 31, 2017. An estimate was completed for Exam 1, and adjustments were made for under‑reported sales price to the tax assessor collector. Specifically, Petitioner reported selling 203 of the 250 vehicles selected in Exam 1 for $500 each, despite the SPVs for those vehicles ranging from $500 to $19,700, with only eleven of the vehicles selected having an actual SPV of $500. A detailed examination was completed for Exam 2, where adjustments were made for titles not transferred timely.
On February 5, 2019, Staff issued a Texas Notification of Audit Results to Petitioner, assessing a liability that consisted of tax, 10% late penalty, 50% fraud penalty, and accrued interest. Petitioner requested redetermination of the assessment. Petitioner contends the SPVs used in the audit is improperly applied because she did not own or sell certain vehicles assessed in the audit and because she is a motor vehicle dealer and SPVs apply only to private party sales. Petitioner also argues the additional 50% penalty should be waived. Staff disagreed and referred the matter to SOAH.
D. ALJ’s Analysis and Recommendation
A tax is imposed on every retail sale of every motor vehicle sold in this state. Tex. Tax Code §§ 152.001(1), .021(a). The tax is imposed on the total consideration paid or to be paid for a motor vehicle. Id. § 152.002(a). A retail sale completed by a motor vehicle dealer in which the seller collects all or part of the total consideration in periodic payments and retains a lien on the motor vehicle until all payments have been received is defined as a seller-financed sale. Id. § 152.001(15).
1. Standard Presumptive Value (SPV)
SPV is defined as the private-party transaction value of a motor vehicle, as determined by the Texas Department of Motor Vehicles based on an appropriate regional guidebook of a nationally recognized motor vehicle value guide service or based on another motor vehicle guide publication that the department determines is appropriate if a private vehicle is not available from a regional guidebook. 34 Tex. Admin. Code § 3.79(a)(9). The taxable value of a used motor vehicle is the greater of: (1) the amount paid or to be paid for the motor vehicle or, (2) 80% of the motor vehicle’s SPV. Id. § 3.79(c)(1).
If the amount paid or to be paid is less than 80% of the motor vehicle's SPV, the purchaser may establish the taxable value of the motor vehicle for the purpose of calculating motor vehicle sales tax due by substituting a certified appraisal, provided the certified appraisal is not less than the amount paid or to be paid for the motor vehicle. Id. § 3.79(c)(2). The taxable value of a used motor vehicle may be established by: (1) a properly completed Application for Texas Certificate of Title, Form 130U, signed by both purchaser and seller when the seller is a Texas dealer; or (2) documentation, including a receipt or invoice, provided by the seller to the purchaser of the vehicle when the seller is a dealer licensed by or under similar regulatory requirements of another state. Id. § 3.79(c)(3)(A), (B).
Petitioner’s primary contention is that the Comptroller erred in using the vehicle’s SPV in estimating the audit tax liability because she was operating as a licensed motor vehicle dealer. While it is true that SPV is defined as “the private party transaction value” of a motor vehicle, as determined by the Texas Department of Motor Vehicles, neither the SPV definition, nor the other relevant Tax Code provisions limit the taxing methodology in the manner used in the audit. For example, a purchaser may establish such a taxable value by providing a receipt or invoice issued by a licensed dealer, or by providing a properly completed Application for Texas Certificate of Title, Form 130-U, signed by both the purchaser and seller when the seller is a Texas dealer. See 34 Tex. Admin. Code § 3.79(c)(3); see also Comptroller’s Decision No. 108,866 (2014).
Generally, the seller of a motor vehicle shall report and pay the tax imposed on a seller‑financed sale to the Comptroller on the seller’s receipts from the seller-financed sales in the same manner as sales tax is reported and paid under Texas Tax Code Chapter 151. Id. See Tex. Tax Code § 152.047(a). The persons obligated by this chapter to pay taxes on the transaction shall file a joint statement with the tax assessor-collector of the county in which the application for registration and for a Texas certificate of title is made. Id. § 152.062(a). A seller engaged in seller-financed motor vehicle sales must keep a lienholder’s copy of the receipt for title application, registration, and motor vehicle tax issued by a county tax assessor‑collector. Id. § 152.0635(b)(1). Additionally, a seller engaged in seller‑financed motor vehicle sales must keep a ledger or other document containing a complete record of the payment history for that motor vehicle that includes: the name and address of the purchaser; the total consideration; the amount of the down payment received at the time the motor vehicle is sold; the date and amount of each subsequent payment; the date of sale; and the date of any repossession. Id. § 152.0635(b)(2). The availability of such records enables the Comptroller’s auditors to independently verify whether the correct amount of tax due was reported on joint statements required to be filed pursuant to Texas Tax Code § 152.062. If the tax assessor-collector or the Comptroller has reason to question the truth of the information in a statement, or if any material fact fails to meet the guidelines promulgated by the Comptroller, the tax assessor-collector or the Comptroller shall require any party to the statement to furnish substantiation of information contained in the statement. Tex. Tax Code § 151.062(e).
When, as in this instance, a motor vehicle seller fails to maintain and provide complete records, in particular sales contracts showing sales prices and trade-in values, Texas Tax Code § 111.0042(d) authorizes the use of the best information available to perform an audit. See Comptroller’s Decision Nos. 108,866 (2014), 45,301 (2005); see also Tex. Tax Code § 111.008(a), which provides that if the Comptroller is not satisfied with a tax report or the amount of tax reported, the Comptroller may compute the amount of tax to be paid from information in the report or any other information available to the Comptroller. The audit documentation is sufficient to establish, prima facie, that the records Petitioner provided were incomplete and unreliable. Therefore, the auditor was authorized to utilize estimation methodologies. The Comptroller has previously held that the use of the SPV is proper where records are incomplete, even in cases where the taxpayer is a dealership. See, e.g., Comptroller’s Decision No. 108,866. Therefore, the use of SPVs in the audit assessment was proper.
Petitioner contends that the use of SPVs in the audit is improper because the Comptroller should have established the taxable value of the assessed vehicles by using properly completed Applications for Texas Certificate of Title under 34 Texas Administrative Code § 3.79(c)(3). Petitioner contends that she filed, with the ************** County Tax Assessor Collector, a Texas a Certificate of Title, Form 130-U, signed by both purchaser and seller for each vehicle, and has therefore met the requirement to establish the taxable value of the vehicles at issue. However, those certificates of title are not in the record, and Petitioner did not provide any alternate documentation to substantiate the value of the vehicles she sold.
Petitioner also contends she was merely serving as the title agent for certain transactions assessed in the audit, which she identified as the $500 sales transactions. For each of those transactions, Petitioner contends she was never the owner or seller of the vehicles that were each sold and purchased by private parties for the sum of $500. However, in each case, Petitioner signed the title on each of the vehicles assessed in the audit. The “owner of a motor vehicle” is defined to mean a person named in the certificate of title as the owner of the vehicle. Tex. Tax Code § 152.001(a)(9)(A). The ALJ concludes Staff met its prima facie burden to demonstrate motor vehicle tax was due on the sales price of the vehicles included in Exam 1A, and Petitioner bears the burden of showing audit error by a preponderance of the evidence. See 34 Tex. Admin. Code § 1.26(e).
2. Title Transfers
A dealer who makes a seller-financed sale must apply to the appropriate county tax assessor-collector (CTAC) to title and register the motor vehicle by filing an Application for Texas Title and/or Registration no later than the 45th day after the date the motor vehicle is delivered to the purchaser. Tex. Tax Code § 152.069(a); 34 Tex. Admin. Code § 3.74(c)(1)(A). A dealer making a seller financed sale must also collect and remit motor vehicle tax on the total consideration for the motor vehicle at the time the Application for Texas Title and/or Registration is presented to the CTAC or collect and remit the motor vehicle tax to the Comptroller as the payments are received. 34 Tex. Admin. Code § 3.74(c)(1)(B)(i), (ii). If the seller fails to apply for title and registration for a motor vehicle sold in a seller financed sale by the 60th day after the date the motor vehicle is delivered to the purchaser, the seller is liable for all unpaid tax on the total consideration. Tex. Tax Code § 152.047(f); 34 Tex. Admin. Code § 3.74(e)(5). In that instance, the dealer must remit all unremitted motor vehicle tax on the first seller-financed sales tax report due no later than the 20th day of the month following the end of the reporting period in which the expiration of the 60 days occurred. 34 Tex. Admin. Code § 3.74(e)(5).
Although Petitioner contested the entire audit, neither party addressed Exam 2 in their written submissions, and Petitioner has not provided sufficient evidence to demonstrate that it complied with the terms of Texas Tax Code § 152.047(f). The ALJ concludes Staff met its prima facie burden to demonstrate motor vehicle tax was due on the sales price of the vehicles included in Exam 2. Petitioner bears the burden of showing audit error by a preponderance of the evidence. See 34 Tex. Admin. Code § 1.26(e). Petitioner has not met its evidentiary burden to establish audit error; therefore, her contention should be denied.
3. Additional 50% Penalty
Petitioner contends the 50% additional penalty should be removed from the assessment. Texas Tax Code § 111.061(b)(1) authorizes a 50% penalty when the failure to pay the tax or file a report when due is the result of fraud or intent to evade the tax. Staff bears the burden to prove by clear and convincing evidence that the imposition of additional penalty for willful or fraudulent failure to pay tax is warranted. 34 Tex. Admin. Code § 1.26(b)(1). Clear and convincing evidence demonstrates the thing to be proved is highly probable. See Black’s Law Dictionary (11th ed. 2019); see also Comptroller’s Decision No. 101,773 (2011).
Gross underreporting, along with other factors or no plausible explanation, is sufficiently indicative of intent to evade the tax to warrant the assessment of the fraud penalty. See, e.g., Comptroller’s Decision No. 111,804 (2015). Gross error means that, after correction of the error, the amount due and payable exceeds the amount initially reported by at least 25%. Tex. Tax Code § 111.205(b). However, the Comptroller does not impose the fraud penalty every time there is gross underreporting. Fraud is actual intentional wrongdoing, and the intent required is the specific purpose to evade payment of a tax. Fraud is never presumed, and a court should not sustain findings of fraud upon circumstances which at most create only suspicion. There is no presumptive fraudulent intent error percentage. Negligence, whether slight or great, is not the equivalent of fraud with intent to evade tax. See, e.g., Comptroller’s Decision Nos. 45,514 (2006), 42,244 (2003), 38,886 (2002), 37,555 (1999), 35,527 (1997), 33,554 (1995); see also Webb v. Comm’r of Internal Revenue, 394 F.2d 366 (5th Cir. 1968).
Petitioner contends that the error rate is due to the erroneous inclusion of assessments where the SPV was applied. Petitioner further contends that there is no evidence to establish her intent to participate in any fraud to evade the tax. As noted above, the application of SPVs in the audit assessment was proper. Petitioner ran the day-to-day operations of the business and signed several sales tax returns and the checks related to those returns during the audit period. Although Petitioner argues the fraud penalty is unwarranted, the overall error rate was more than 48%, and Petitioner did not provide a plausible explanation for the significant underreporting. In addition, she did not retain or produce the required records. Therefore, the ALJ concludes Staff’s evidence is sufficient to prove, by clear and convincing evidence, that the imposition of additional penalty for willful or fraudulent failure to pay tax is warranted.
III. FINDINGS OF FACT
1. During the period at issue, ************** (Petitioner) owned and operated a used car dealership in CITY, Texas.
2. Petitioner was permitted for seller-financed motor vehicle sales tax.
3. Petitioner was involved in the day-to-day operations of the business, including signing the sales tax returns and the checks that accompanied those returns.
4. In April 2018, the Tax Division (Staff) of the Texas Comptroller of Public Accounts (Comptroller) initiated a motor vehicle sales tax compliance audit for the period September 1, 2013, through December 31, 2017.
5. Petitioner did not provide properly completed applications for certificate of title to establish taxable value of the assessed vehicles.
6. An estimate was completed for Exam 1, and adjustments were made for under‑reported sales price to the tax assessor collector. A detailed examination was completed for Exam 2, where adjustments were made for titles not transferred timely.
7. On February 5, 2019, Staff issued a Texas Notification of Audit Results to Petitioner, assessing a liability that consisted of tax, 10% late penalty, 50% fraud penalty, and accrued interest.
8. Petitioner requested redetermination of the assessment.
9. Staff referred the matter to the State Office of Administrative Hearings (SOAH).
10. On December 15, 2021, Staff issued a Notice of Hearing by Written Submission. The notice contained a statement of the nature of the hearing; a statement of the legal authority and jurisdiction under which the hearing was to be held; a reference to the particular sections of the statutes and rules involved; and a short, plain statement of the factual matters asserted, or an attachment that incorporated by reference the factual matters asserted in the complaint or petition filed with the state agency.
11. On December 21, 2021, the Administrative Law Judge issued Order No. 1, which set the written submission hearing.
12. Staff agreed to waive accrued interest from March 1, 2021, through November 30, 2021.
13. The contested case record closed on March 21, 2022.
IV. CONCLUSIONS OF LAW
1. The Comptroller has jurisdiction over this matter. See Tex. Tax Code ch. 111.
2. SOAH has jurisdiction over matters related to the hearing in this matter, including the authority to issue a proposal for decision with findings of fact and conclusions of law. See Tex. Gov’t Code ch. 2003.
3. Staff provided proper and timely notice of the hearing. See Tex. Gov’t Code ch. 2001; Tex. Tax Code § 111.009.
4. A tax is imposed on every retail sale of every motor vehicle sold in this state. Tex. Tax Code §§ 152.001(1), .021(a).
5. The tax is imposed on the total consideration paid or to be paid for a motor vehicle. Tex. Tax Code § 152.002(a).
6. A retail sale completed by a motor vehicle dealer in which the seller collects all or part of the total consideration in periodic payments and retains a lien on the motor vehicle until all payments have been received is defined as a seller-financed sale. Tex. Tax Code § 152.001(15).
7. Standard presumptive value (SPV) is defined as the private-party transaction value of a motor vehicle, as determined by the Texas Department of Motor Vehicles based on an appropriate regional guidebook of a nationally recognized motor vehicle value guide service or based on another motor vehicle guide publication that the department determines is appropriate if a private vehicle is not available from a regional guidebook. 34 Tex. Admin. Code § 3.79(a)(9).
8. The taxable value of a used motor vehicle is the greater of: (1) the amount paid or to be paid for the motor vehicle or, (2) 80% of the motor vehicle’s SPV. 34 Tex. Admin. Code § 3.79(c)(1).
9. If the amount paid or to be paid is less than 80% of the motor vehicle's SPV, the purchaser may establish the taxable value of the motor vehicle for the purpose of calculating motor vehicle sales tax due by substituting a certified appraisal, provided the certified appraisal is not less than the amount paid or to be paid for the motor vehicle. 34 Tex. Admin. Code § 3.79(c)(2).
10. The taxable value of a used motor vehicle may be established by: (1) a properly completed Application for Texas Certificate of Title, Form 130U, signed by both purchaser and seller when the seller is a Texas dealer; or (2) documentation, including a receipt or invoice, provided by the seller to the purchaser of the vehicle when the seller is a dealer licensed by or under similar regulatory requirements of another state. 34 Tex. Admin. Code § 3.79(c)(3)(A), (B).
11. Neither the SPV definition, nor the other relevant Tax Code provisions limit the taxing methodology in the manner used in the audit. For example, a purchaser may establish such a taxable value by providing a receipt or invoice issued by a licensed dealer, or by providing a properly completed Application for Texas Certificate of Title, Form 130-U, signed by both the purchaser and seller when the seller is a Texas dealer. See 34 Tex. Admin. Code § 3.79(c)(3); see Comptroller’s Decision No. 108,866 (2014).
12. If the tax assessor-collector or the Comptroller has reason to question the truth of the information in a statement, or if any material fact fails to meet the guidelines promulgated by the Comptroller, the tax assessor-collector or the Comptroller shall require any party to the statement to furnish substantiation of information contained in the statement. Tex. Tax Code § 152.062(e).
13. Petitioner did not provide any documentation to substantiate the value of the vehicles she sold.
14. Generally, the seller of a motor vehicle shall report and pay the tax imposed on a seller financed sale to the Comptroller on the seller’s receipts from the seller-financed sales in the same manner as sales tax is reported and paid under Chapter 151. Tex. Tax Code § 152.047(a).
15. The persons obligated by Texas Tax Code Chapter 152 to pay taxes on the transaction shall file a joint statement with the tax assessor-collector of the county in which the application for registration and for a Texas certificate of title is made. Tex. Tax Code § 152.062(a).
16. A seller engaged in seller-financed motor vehicle sales must keep a lienholder’s copy of the receipt for title application, registration, and motor vehicle tax issued by a county tax assessor collector. Tex. Tax Code § 152.0635(b)(1).
17. A seller engaged in seller-financed motor vehicle sales must keep a ledger or other document containing a complete record of the payment history for that motor vehicle that includes: the name and address of the purchaser; the total consideration; the amount of the down payment received at the time the motor vehicle is sold; the date and amount of each subsequent payment; the date of sale; and the date of any repossession. Tex. Tax Code § 152.0635(b)(2).
18. The availability of such records enables the Comptroller’s auditors to independently verify whether the correct amount of tax due was reported on joint statements required to be filed pursuant to Texas Tax Code § 152.062. When, as in this instance, a motor vehicle seller fails to maintain and provide complete records, in particular sales contracts showing sales prices and trade-in values, Texas Tax Code § 111.0042(d) authorizes the use of the best information available to perform an audit. See Comptroller’s Decision Nos. 108,866 (2014), 45,301 (2005).
19. If the Comptroller is not satisfied with a tax report or the amount of tax reported, the Comptroller may compute the amount of tax to be paid from information in the report or any other information available to the Comptroller. Tex. Tax Code § 111.008(a).
20. The audit documentation is sufficient to establish, prima facie, that the records Petitioner provided were incomplete and unreliable. Therefore, the auditor was authorized to utilize estimation methodologies.
21. The use of the SPV is proper where records are incomplete, even in cases where the taxpayer is a dealership. See, e.g., Comptroller’s Decision No. 108,866.
22. The owner of a motor vehicle is defined to mean a person named in the certificate of title as the owner of the vehicle. Tex. Tax Code § 152.001(a)(9)(A).
23. Petitioner signed the title on each of the vehicles assessed in the audit.
24. A dealer who makes a seller-financed sale must apply to the appropriate county tax assessor-collector (CTAC) to title and register the motor vehicle by filing an Application for Texas Title and/or Registration no later than the 45th day after the date the motor vehicle is delivered to the purchaser. Tex. Tax Code § 152.069(a); 34 Tex. Admin. Code § 3.74(c)(1)(A).
25. A dealer making a seller-financed sale must also collect and remit motor vehicle tax on the total consideration for the motor vehicle at the time the Application for Texas Title and/or Registration is presented to the CTAC or collect and remit the motor vehicle tax to the Comptroller as the payments are received. 34 Tex. Admin. Code § 3.74(c)(1)(B)(i), (ii).
26. If the seller fails to apply for title and registration for a motor vehicle sold in a seller financed sale by the 60th day after the date the motor vehicle is delivered to the purchaser, the seller is liable for all unpaid tax on the total consideration. Tex. Tax Code § 152.047(f); 34 Tex. Admin. Code § 3.74(e)(5).
27. A dealer must remit all unremitted motor vehicle tax on the first seller-financed sales tax report due no later than the 20th day of the month following the end of the reporting period in which the expiration of the 60 days occurred. 34 Tex. Admin. Code § 3.74(e)(5).
28. Staff met its prima facie burden to demonstrate motor vehicle tax was due on the sales price of the vehicles included in Exams 1A and 2, and Petitioner bears the burden of showing audit error by a preponderance of the evidence. See 34 Tex. Admin. Code § 1.26(e).
29. Petitioner failed to establish audit error.
30. Texas Tax Code § 111.061(b)(1) authorizes a 50% penalty when the failure to pay the tax or file a report when due is the result of fraud or intent to evade the tax. Staff bears the burden to prove by clear and convincing evidence that the imposition of additional penalty for willful or fraudulent failure to pay tax is warranted. 34 Tex. Admin. Code § 1.26(b)(1).
31. Clear and convincing evidence demonstrates the thing to be proved is highly probable. See Black’s Law Dictionary (11th ed. 2019); see also Comptroller’s Decision No. 101,773 (2011).
32. Gross underreporting, along with other factors or no plausible explanation, is sufficiently indicative of intent to evade the tax to warrant the assessment of the fraud penalty. See, e.g., Comptroller’s Decision No. 111,804 (2015).
33. Gross error means that, after correction of the error, the amount due and payable exceeds the amount initially reported by at least 25%. Tex. Tax Code § 111.205(b).
34. The Comptroller does not impose the fraud penalty every time there is gross underreporting. Fraud is actual intentional wrongdoing, and the intent required is the specific purpose to evade payment of a tax. Fraud is never presumed and a court should not sustain findings of fraud upon circumstances which at most create only suspicion. There is no presumptive fraudulent intent error percentage. Negligence, whether slight or great, is not the equivalent of fraud with intent to evade tax. See, e.g., Comptroller’s Decision Nos. 45,514 (2006), 42,244 (2003), 38,886 (2002), 37,555 (1999), 35,527 (1997), 33,554 (1995); see also Webb v. Comm’r of Internal Revenue, 394 F.2d 366 (5th Cir. 1968).
35. Petitioner did not provide a plausible explanation for the significant underreporting.
36. Staff’s evidence is sufficient to prove, by clear and convincing evidence, that the imposition of additional penalty for willful or fraudulent failure to pay tax is warranted.
37. The audit assessment should be affirmed, except as agreed by Staff.
SIGNED March 22, 2022.
KATHY PICKUP
ADMINISTRATIVE LAW JUDGE
STATE OFFICE OF ADMINISTRATIVE HEARINGS
ENDNOTES:
[1] The date calculated is 25 days after this decision is signed. See APA, Tex. Gov’t Code § 2001.146(a); S.B. 1095, Acts 2017, 85th Leg. For additional guidance, refer to the Frequently Asked Questions Related to Motions for Rehearing, found here: http://comptroller.texas.gov/taxes/publications/96-1789.pdf
[2] See Tex. Gov’t Code § 2003.101(e) and (f).
[3] At present, insufficient information is available to determine which items and amounts are disputed or undisputed for purposes of Tex. Tax Code, Ch. 112. In the absence of this information, the Comptroller will assume the entire amount of the assessment, as it appears in Comptroller’s Decision Attachment A, the Notification of Hearing Results, remains in dispute. If Petitioner intends to sue the comptroller to dispute an amount of tax, penalty, or interest assessed in a deficiency redetermination or jeopardy determination under Tex. Tax Code, Ch. 111, Petitioner is required to file a motion for rehearing that “states the specific grounds of error and the disputed amounts associated with the grounds of error.” Tex. Tax Code § 112.201(a)(3). Petitioner should refer to Tex. Tax Code, Ch. 112, for further guidance regarding a suit after redetermination.
[4] See Tex. Tax Code § 111.0081(c).