District Court Finds Texas Sales Tax Rule on Refunds Invalid & Illegal

May 2013
Author:  Jana Gradeva

Jana Gradeva


SALT Services

14241 Dallas Parkway, Suite 1100
Dallas, Texas 75254-2961


The District Court of Travis County has declared various provisions of the Texas Comptroller of Public Accounts’ rule on sales and use tax refunds to be invalid and illegal. The invalidated subsections (a)(4), (b)(10) and (e) relate to Tex. Admin. Code §3.325 Refunds and Payments under Protest. (Ryan, LLC v. Combs, Travis County, Tex. Dist. Ct. (200th Judicial Dist.), Cause No. D-1-GN-12-002388, 05/10/2013)

Texas Tax Code §111.104(c ) provides that the refund claim must be in writing, “state fully and in detail the reason or ground on which the claim is founded,” and “be filed before the expiration of the applicable limitations period.”

The comptroller’s rule is merely supposed to be the agency’s interpretation of the statute. However, on July 19, 2011, the comptroller revised its rule 3.325 to add a list of transaction-level details required for a properly filed refund claim. This rule was further amended on January 7, 2013, to include even more details and documentation requested from taxpayers claiming refunds of sales taxes paid. In its revised rule, the comptroller mandated substantial information with the initial filing of a refund claim. The required information includes a detailed transaction schedule with vendor names, vendor taxpayer ID numbers, invoice numbers, invoice dates, description of each item, reason for refund, applicable citation of authority, amount of refund and local jurisdictions where tax was remitted. When the revised rule took effect in July 2011, the comptroller denied many refund claims due to incomplete information at the time of submission, indicating the statute would not toll for claims filed without this supporting documentation.

Judge Amy Clark Meachum found that both revisions of Tex. Admin. Code §3.325(a)(4), (b)(10) and (e) impose additional burdens, conditions and restrictions on sales and use tax refund claims in excess of the specific provisions of the statute and are, therefore, invalid and illegal.

This ruling signifies an important victory for taxpayers since the District Court agreed the comptroller’s requirements pose an excessive burden on taxpayers and did not allow the comptroller to freely interpret the statute beyond its legislative intent.

If your sales and use tax refund claim has been deemed incomplete and denied, or if you need more information on how to file a Texas sales and use tax refund claim, please contact your BKD advisor.

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