How does the statute of limitations for a sales and use tax refund claim work for reporting periods that were part of a prior audit?

Subject

Statute Of Limitations — Tax Refund Claim — Reporting Periods Within An Audit

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9405L1301E01

Plain-English Summary

This letter (a reissue of an earlier April 6, 1994 letter, clarified and reissued May 27, 1994) answers a tax professional's questions about how the statute of limitations applies to a sales and use tax refund claim covering reporting periods that were also part of a prior audit.

The taxpayer had been audited for periods 8601 through 8906 (audit periods are expressed as YYMM). A determination was issued June 14, 1990; the taxpayer timely requested redetermination on July 13, 1990; the parties reached agreement and the audit was amended October 31, 1990; an amended determination was issued November 6, 1990; and that amended determination became final December 6, 1990. On April 20, 1993, the taxpayer submitted a refund claim for overpayments in periods 8903 through 8906.

The Comptroller's analysis:

• The April 20, 1993 refund claim for periods 8903–8906 was timely. Under the standard four-year statute of limitations, the claim needed to be filed by April 20, 1993 (four years after the 8903 tax was due). It was filed on the deadline itself, so it was timely for 8903 and, necessarily, for the later periods 8904–8906 as well.
• The redetermination proceeding tolled (paused) the limitations clock. The 146 days between July 13, 1990 (when the taxpayer requested redetermination) and December 6, 1990 (when the determination became final) did not count against the four-year statute of limitations for any reporting period included in that redetermination proceeding (8601–8906). Those 146 days are added to the normal four-year period to calculate when limitations actually expired for each period in the audit. Sec. 111.207(d), Tax Code.
• Applying "four years plus 146 days": the statute of limitations for period 8601 expired July 16, 1990; for period 8902 it expired August 13, 1993; and for the latest audit period, 8906, it expired on or about December 13, 1993.
• A separate six-month grace period exists, but only for amounts actually included in the final determination. Had the taxpayer filed a refund claim within six months of December 6, 1990 (the date the determination became final) for transactions that were included in that final determination, the claim would have been timely even if the ordinary four-year-plus-146-day period had already run. Sec. 111.104(c)(3), Tax Code. This six-month grace period does not extend to overpayments on other transactions within the audit period that weren't part of the determination. Sec. 111.104(d), Tax Code.
• Filing a refund claim for one set of periods doesn't toll limitations for the whole audit. The April 20, 1993 refund claim for 8903–8906 only tolled limitations for the specific transactions it covered — it did not reopen or extend limitations for other transactions within those same periods, or for the rest of the audit period.

The Comptroller emphasized that these responses address limitations only, not the merits or validity of the underlying refund claim, and that the analysis is based on the specific facts presented.

What This Means For You

If you are pursuing a sales and use tax refund for periods that were part of a completed audit: Don't assume the plain four-year statute of limitations tells the whole story. If the periods went through a redetermination proceeding, the days between your request for redetermination and the date the determination became final are added on top of the four-year period — extending your filing deadline.

If a determination became final and you didn't file within six months: You may have lost access to the extra six-month grace period under Sec. 111.104(c)(3), Tax Code, which only covers transactions actually included in that final determination — not every transaction in the broader audit period.

If you file a refund claim covering only some periods or transactions: That claim only tolls limitations for the specific transactions it covers. It does not pause the clock for other transactions in the same reporting periods or elsewhere in the audit, so don't rely on one claim to preserve your rights on unrelated amounts.

Q&A

Q: Does requesting redetermination of an audit pause the statute of limitations for a related refund claim?
A: Yes. The days between the date a taxpayer requests redetermination and the date the determination becomes final are not counted against the four-year statute of limitations for any reporting period included in that redetermination proceeding. Those days are added to the four-year period to calculate the actual limitations deadline. (Sec. 111.207(d), Tax Code.)

Q: If I miss the four-year-plus-tolled-days deadline, is there any other way to file a timely refund claim?
A: Possibly, but only for amounts included in a final determination. A refund claim filed within six months of the date the determination became final is timely for transactions that were part of that determination, even if the standard limitations period already expired. This extra six-month window does not apply to other transactions within the audit period that weren't included in the determination. (Sec. 111.104(c)(3) and Sec. 111.104(d), Tax Code.)

Q: If I file a refund claim for some reporting periods within an audit, does that protect my ability to claim refunds for other periods or transactions in the same audit?
A: No. A refund claim only tolls limitations for the specific transactions to which it applies. It does not reopen the entire audit period or toll limitations for other transactions, even within the same reporting periods covered by the claim.

Citations

• Tex. Tax Code § 111.207(d) (tolling of limitations during redetermination proceedings)
• Tex. Tax Code § 111.104(c)(3) (six-month grace period for refund claims tied to a final determination)
• Tex. Tax Code § 111.104(d) (grace period limited to amounts included in the determination)

Original ruling text

May 27, 1994

Dear *****:

I received some questions about my original letter of April
6, 1994. Therefore, I am reissuing that response with a few
clarifications. For your convenience, I capitalized the new
language. (Words underlined in the original remain
underlined here.) I'm not changing any of my ultimate
conclusions as applied to your set of facts. However, I
wanted to ensure that the analysis was accurate so you could
apply it to other clients, in the future. The entire
response, as clarified, follows:

Thank you for your faxes of December 29, 1993, and January
4, 1994. I apologize for the delay. You say you represent
** in a sales and use tax refund claim that includes
periods within a recent audit. You asked about the statute of
limitations for the reporting periods within the audit. I have
confirmed the following dates:

1. *** was audited for sales and use taxes for the periods 8601 through
   8906.

2. A determination was issued on June 14, 1990.

3. ***'s timely request for redetermination was postmarked July 13,
   1990.

4. We reached agreement with *** and the audit amendment was completed
   October 31, 1990.

5. An amended determination was issued November 6, 1990.

6. The amended determination became final December 6, 1990.

You say that, on April 20, 1993, *** submitted a refund
claim for sales and use tax overpayments that occurred
between 8903 and 8906.

Question 1: Is the refund claim of April 20, 1993, timely
for the periods 8903 through 8906?

Response: Yes. Sales and use taxes for 8903 were due and
payable April 20, 1989 (assuming the 20th did not fall on a
weekend or legal holiday, in which case they were due on the
next business day). Therefore, under the standard four-year
statute of limitations, April 20, 1993, was the last day to
file a timely refund claim for 8903. Obviously, 8904, 8905
and 8906 were also within limitations as of April 20, 1993.
In addition, limitations on 8903 through 8906 did not run
for the period of time between July 13, 1990 (the date ***
requested redetermination) and the date the determination
became final (December 6, 1990). Sec. 111.207(d), Tax Code.
In other words, the days between those two dates are not
counted against the four-year statute of limitations for any
reporting period included in the Texas proceedings. Those
days should be added to the four-year period in order to
calculate the date limitations expired for each reporting
period included in the redetermination proceeding.

Question 2: How far back into the audit period may *** go
for refunds, within limitations?

Response: Except for the TRANSACTIONS that WERE reportedly
included in the refund claim of April 20, 1993, limitations
appears to have expired, AS OF THE DATES OF YOUR FAXES TO ME
(DECEMBER 29, 1993, AND JANUARY 4, 1994), for every
TRANSACTION within the audit PERIOD.

There were 146 (one-hundred forty-six) days between the date
*** requested redetermination and the date the determination
came final. Limitations for sales and use tax refunds did
not run during that 146-day "administrative proceeding" for
all periods included in the proceeding (8601-8906).
Therefore, *** may calculate its statute of limitations for
sales and use tax refunds for each period within 8601-8906
by adding four years and 146 days to the due dates for sales
and use taxes. Examples: The statute of limitations for
8601 expired on July 16, 1990, which is four years, one-
hundred forty-six days after February 20, 1986. The statute
of limitations for 8902 expired on August 13, 1993, which is
four years, one-hundred forty-six days after March 20,
1989. ACCORDING TO MY CALCULATIONS, THE STATUTE OF LIMITATIONS
FOR REFUNDS OF TAXES PAID ON TRANSACTIONS WITHIN THE LATEST
PERIOD IN THE AUDIT (8906) FINALLY EXPIRED ON OR ABOUT
DECEMBER 13, 1993.

Had *** filed a sales and use tax refund claim within six
months of December 6, 1990, or transactions that were
included in the final determination, the claim would have
been timely even for taxes that were originally due and
payable more than four years and 146 days earlier. Sec.
111.104(c)(3), Tax Code. This extra six-month grace period
applies only to amounts included in the determination. It
does not apply to overpayments related to other transactions
within the audit period. Sec. 111.104(d).

Question: Did the filing of a refund claim for 8903 through
8906 toll limitations for refund claims throughout the
entire audit period?

Response: No, it tolled limitations only for REFUNDS OF TAXES
PAID ON the TRANSACTIONS to which it applied. It did not
reopen the entire audit period for assessment or refund
purposes. ALSO IT DID NOT TOLL LIMITATIONS FOR REFUNDS OF TAXES
PAID ON OTHER TRANSACTIONS THAT OCCURRED WITHIN THE REFUND PERIOD
(8903-8906).

The above responses are addressed to limitations, only, and
do not relate to the validity of your client's claim (which
I have not seen). This opinion is based on the facts
presented. Different or additional facts, though similar,
might lead to different answers. If you have any questions,
please feel free to call me at 1-800-531-5441, extension 3-3889.

Sincerely,

John Christian

NOTE: Previous Accession Number 9405351L