Texas Sales Tax Collection Error Means Dallas Owes $5.2M

A Texas sales tax collection error, which was recently discovered in a sales tax audit, results in the City of Dallas owing $5.2 million to the state of Texas. The Texas Comptroller’s Office notified the City’s budget office in late-September 2019 that a retailer mistakenly reported all sales to the city rather than to the customer’s “ship to” address. This misallocation caused the state to make an overpayment of sales tax to the City of Dallas. Although at first glance the error seems like a large sum of money, the City of Dallas’ budget for 2020 includes receipts of $325 million in sales tax. In September 2019 alone, it is estimated that Dallas will receive $25.6 million in sales tax revenue.

Elizabeth Reich, Dallas’ Chief Financial Officer, plans to pay back the full balance to the state by deducting the amount from August 2019’s sales tax revenues. In a council memo, Reich suggested that the one-time payment would be more beneficial for Dallas as it would avoid additional interest expenses that would have accrued if the balance were paid back in installments. Many citizens have questioned how such a significant error occurred in the first place. Confounding people even more is the fact that the Texas sales tax collection error ran between the periods of July 2014 and July 2017. According to Kevin Lyons, a spokesman for the Texas Comptroller’s Office, in Texas sales tax compliance taxpayers reporting sales under the wrong address is a common mistake. Furthermore, the documents included with the filings are not detailed enough for the Texas Comptroller’s Office to determine an error was made without conducting a Texas sales tax audit of the taxpayer’s records. Whether these statements are accurate or not is debatable, but what we do know is that this is not the City of Dallas’ first omission pertaining to Texas sales tax collection in recent years.

Despite having routine audits, the City of Dallas has received other overpayments from the state. Dallas is currently under a Texas sales tax collection arrangement, paying monthly installments of $146,000 for a $3.7 million overpayment unrelated to this one. The City of Dallas is expected to have completed its payments for that obligation by October 2021.

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