28 Oct 2011
4 min read

How to Appeal an Audit Assessment in Texas

Learn more about the challenging odds in Texas tax appeals. Are you prepared for a 91% chance of an unfavorable ruling?
Table of contents

As a CPA firm focusing on state and local taxes, we speak with many taxpayers going through audits. A recurring theme that we often hear is that the auditor, audit supervisor or even the entire state audit division are being totally unreasonable or unfair. They can’t wait to appeal their audit, because once they get in front of an “impartial third party”, they feel that they will be treated more justly and receive a different outcome. While these taxpayers are often correct that they are being treated unreasonably, they are far from correct in their belief they will receive a different outcome in appealing their audit; especially in the state of Texas.

Should You Appeal Your Assessment in Texas?

Probably, especially if you disagree with it, but before you do, understand the odds are stacked against you. In addition you should know the audit process and try to resolve any issues at the appropriate levels during the process. Do not give up in trying to work with the auditor. If need be bring in someone to work on your behalf. Here are some reasons why.

At a recent tax conference, Victor John Simonds, an Administrative Law Judge with the Texas State Office of Administrative Hearings (SOAH) shared some startling statistics. (Disclosure: He noted that the statistics he was giving were the result of his own independent investigation and not necessarily the official stats of SOAH.) The first thing he did was tell us that the number of cases appealed and referred to SOAH have shot up in the last few years.

Tax Cases Referred to SOAH Soars in Recent Years

You can draw your own conclusions on why the number of cases referred to SOAH have spiked so much in recent years. And, by the way, since these numbers were given to us in August, 2011, he estimated that the final number for 2011 might reach 500. He opted not to speculate on why the marked increase. But that doesn’t mean we can’t. One might reasonably conclude that the audit division is simply being more aggressive. One might also speculate that in more difficult economic times, companies who can’t pay an assessment are opting to delay the ultimate day of judgment by exhausting all administrative remedies. Now of course, there may be other reasons. Perhaps the word is getting out that taxpayers get better treatment at SOAH? Well if that’s the word that’s getting out it would be very misleading, as we will show below.

We’ve always recommended exhausting every option possible to resolve any and all issues without going to appeals and have been very successful in that approach. We know that the administrative appeal process is costly and not very productive. But these statistics throw a whole new and glaring light on just what the odds really are.

There are currently 3 administrative law judges on the tax team at SOAH. They are Victor John Simonds, Peter Brooks and Alvin Stoll. Judge Simonds shared with us their individual statistics when it comes to affirming cases that come before each of them. There are many ways to measure this but one way to assess your odds of success is to see what percentage of cases heard by a judge are affirmed in total (meaning the ALJ affirmed the auditor’s position and ruled against the taxpayer on every issue in the audit) and what percentage of cases are at least affirmed in part.

This team of ALJ’s is almost shockingly consistent in ruling against the taxpayer. In fully 80% of the cases, they affirm the state’s position 100% on every issue in the audit. Without considering the issues presented in these cases and how your facts would stand up against those cases and assuming your case is typical, you can expect to get 0, nada, zip, on any issue you present 8 times out of 10. Yikes!

Photo by Alois Komenda on Unsplash

Ok, well maybe the other 20% is more encouraging. Maybe not. In fact, as it turns out the ALJ’s not only rule in favor of the state 100% of the issues in 80% of the cases, but they also rule in favor of the state on at least one issue another 11% of the time. So overall, the ALJ’s rule against the taxpayer in 91% of the cases they hear.

Check out these statistics by the ALJ.

  • Simonds -- Rules against the taxpayer fully or at least partially 96% of the time!
  • Brooks -- Rules against the taxpayer fully or at least partially 98% of the time!
  • Stoll -- Rules against the taxpayer fully or at least partially 88% of the time!

What Does This All Mean?

It’s impossible to draw many definitive conclusions from this limited information. Maybe 80% of all these cases are slam dunks against deadbeat taxpayers who collect tax on clearly taxable stuff and don’t remit it. But that assumes deadbeat taxpayers would be conscientious enough to file the necessary appeals and all, so it’s hard to go there.

The best lesson here, in my opinion, is that a company should do all they can to resolve audit disputes at the field level. Do your best to maintain a professional relationship with that auditor and their supervisor and manager. You should always strive to avoid audit assessments by having processes in place in advance. For example, exemption certificate management is one critical area where the state finds very low-hanging fruit and the most liberal, forgiving ALJ simply can’t overrule the auditor. Just always remember, that it’s never too early to ask us for help.


In the realm of tax assessments and appeals in Texas, understanding the daunting odds is the first step. A closer look at the statistics from Administrative Law Judges reveals an uphill battle. With 80% of cases affirming the state's position, and an additional 11% partially siding with the state, the odds are stacked against taxpayers. While specific conclusions about these cases are challenging to draw, one lesson stands clear: it's essential to exhaust all possible options to resolve audit disputes at the field level. Maintaining a professional relationship with auditors and their supervisors is vital, and proactive measures, such as exemption certificate management, can go a long way in avoiding costly and unproductive appeals. Remember, it's never too early to seek professional help in navigating these difficult processes.
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