Sales Tax Crime:
How It Hurts Texas
Sales tax provides the greatest source of tax revenue to the state. In fiscal 2012, Texas sales tax collections totaled $24.1 billion. This revenue is then allocated to:
- general revenue for state operations,
- Texas Parks and Wildlife, and
- Texas Historical Commission.
Case News Release
October 31, 2013: Salvador Rosa Garza, 41, of Stanton, was arrested after being indicted by a federal grand jury on two counts of Wire Fraud. Garza, a fuel delivery driver, is accused of delivering fuel to his employer’s client, Standard Sales, but intentionally reporting to his employer and the client the delivery of a larger amount, resulting in the overbilling of the client through an e-billing system. Garza is alleged to have fraudulently over reported the delivered amount twice, causing the client to be overcharged over $800,000. Garza’s case was investigated by the FBI and the Criminal Investigation Division of the Texas Comptroller. The case, filed as MO13CR0289, is pending in the U.S. District Court for the Western District of Texas, Midland-Odessa Division.
Sales Tax Investigations
The Texas state sales and use tax rate is 6.25% (set by the Legislature), but local taxing jurisdictions (cities, counties, special purpose districts and transit authorities) may also impose sales and use tax up to 2% for a total maximum combined rate of 8.25%. Please review Guidelines for Collecting Local Sales and Use Tax for additional information on local sales and use tax.
The crimes and penalties relating to the Sales Tax are found in Chapter 151, Subchapter L of the Tax Code. The crimes include both misdemeanors and felonies, with the highest being second degree felonies.
Conduct punishable as a felony includes:
- Intentionally or knowingly failing to pay taxes collected, when amount not paid is $1,500 or more (see §151.7032; amounts under $1,500 are misdemeanors);
- Intentionally or knowingly committing various fraudulent acts with respect to books and records required to be made or kept by law (see §151.7102).
Other Consequences in Addition to Criminal Punishment
Sales Tax permits may be suspended or revoked, and former holders of such permits may be denied new permits if the Comptroller is not satisfied that the person will comply with the Sales Tax statutes or rules in the future. (See §151.203 and §151.204)
Venue of Case Prosecutions
Sales Tax cases may be prosecuted in the county in which any element of the crime occurs, or in Travis County. (See §151.714)
House Bill 11 Criminal Cases
Passed during the 80th Legislative Session in 2007, HB 11 dramatically increased the Comptroller’s ability to identify, audit and, when appropriate, prosecute retailers who are collecting sales tax but not remitting the proper amount to the state.
HB 11 amended the Alcoholic Beverage Code and the Tax Code to require distributors and wholesalers who make sales of ale, beer, wine, cigarettes, cigars and tobacco products to Texas retailers to report those sales monthly to the Comptroller’s office. Those distributors and wholesalers are also required now to report that data electronically, unless inability to do so is shown.
HB 11 data, which has now been collected since January 2008, allows the Comptroller to compare the purchases that retailers have made of these products with the sales that retailers are required to report. Because both sets of data are largely received electronically, discrepancies can be more easily and rapidly identified. Rapid identification is essential so that the Comptroller auditors can begin their work to mitigate and recoup the revenue loss to the state. Since fiscal 2009, the Comptroller's office has identified more than $502 million due to the state.
In some cases, audit documentation may suggest that the taxpayer had criminal intent to evade taxes. If so, the case will be reviewed and evaluated by the Criminal Investigations Division for the possible filing of criminal charges.