How Texas Comptroller sampling works, when it is allowed, what “projection” means, and how to challenge a distorted sample in a Texas sales tax audit.
If you are in a Texas sales tax audit, one of the most critical points is when the Texas Comptroller decides to use sampling and projection. Sampling is not simply a shortcut—it is a method that can turn a limited number of errors into a projected assessment across a much larger audit period.
Texas law provides a specific framework for sampling and projection, and the Comptroller also issues guidance on how sampling is applied in practice.
This guide explains sampling in plain language, outlines what Texas requires, and highlights where you may have leverage to challenge or refine the results.
What sampling and projection mean in a Texas sales tax audit
In a Texas sales and use tax audit, the auditor may examine all transactions or may test a sample of transactions or time periods and use the results to estimate (“project”) the tax due for the full audit population.
Texas’s sampling statute is explicitly about using a sample technique to establish tax liability and projecting assessments. The Comptroller’s sampling guidance also treats sampling as a standard audit tool when planned and documented correctly.
Why this matters: If your sample contains missing exemption support, misclassified transactions, or non-representative periods, the projected assessment can be much larger than the true liability.
When Texas is allowed to use sampling in an audit
Texas law outlines when sampling is considered appropriate. Under Texas Tax Code § 111.0042, sampling may be used when:
- Records are so detailed, complex, or voluminous that auditing all transactions would be impractical
- Records are inadequate or insufficient to support a complete audit
- The cost of reviewing all records would be unreasonable relative to the benefit, and sampling is expected to produce a reliable result
The Comptroller’s auditing guidance reflects this same framework and confirms the authority to use sampling methods under § 111.0042.
Practical takeaway
Sampling is most likely when:
- You have high-volume transactions
- Your system exports are incomplete or difficult to reconcile
- Your records do not support a full audit efficiently
If the auditor is pushing sampling, you can create a free account with Sales Tax Helper to help you evaluate whether the statutory criteria truly fit your situation and build a strategy that reduces projection risk.
Written notice is required before sampling is used
Texas law requires written notice before the Comptroller uses sampling to establish liability.
The Comptroller’s Auditing Fundamentals – Chapter 7 adds a key operational detail: written notification of sampling procedures will be given no later than after examination of 25% of the sample, and it must be delivered or mailed to the taxpayer-designated decision-maker.
What good notice should communicate
Texas’s Sampling Manual provides a “Notification of Sampling Procedures for State Tax Audit” template that shows the type of information the Comptroller expects to document, including:
- records to be examined,
- the sampling unit (transactions, clusters, days/weeks/months),
- selection method (often computer-generated random selection),
- sample size and selected periods (if time-period sampling),
- sample base and population base, including criteria used to define the population.
Why this matters: If the population definition is unclear, the projection can be unfair. Clear notice is a leverage point because it locks the auditor into a defined plan you can evaluate.
Normal business conditions and removing non-representative transactions
Texas law gives taxpayers a very specific protection: the sample must reflect as nearly as possible normal business conditions during the audit period.
It also gives you a direct remedy: if you can demonstrate a transaction in the sample period is not representative of your normal operations, that transaction must be removed from the sample and separately assessed.
Examples of not representative facts (real audit life)
- a one-time bulk sale or liquidation event
- a system conversion month (POS/ERP changeover)
- an abnormal promotion period
- a major disruption (temporary closure, disaster recovery period)
- atypical staffing or operational breakdown that caused unusual errors
This is one of the most useful Texas sampling protections because it lets you prevent a “bad month” from becoming the audit’s reality.
You can create a free account with Sales Tax Helper to help you build a normal conditions file (seasonality proof, system change logs, operational records) to remove non-representative transactions and reduce projected liability.
How projection works and why it inflates assessments
Once a sample is tested, auditors typically convert findings into an error rate or adjustment factor and apply it to a larger population (the projected assessment).
Your highest risk points are usually:
- Exemptions and resale documentation gaps in the sample
- Use tax on purchases where invoices are missing or tax-paid evidence is unclear
- Reconciliation variances (POS vs GL vs deposits) that are treated as taxable receipts
- Overbroad population definitions (mixing channels or locations that behave differently)
Texas’s sampling guidance emphasizes that population criteria must be defined clearly enough for a third party to understand what is included and to recreate the population. This matters because projection accuracy depends on the population and base being correctly defined.
Challenging the sampling method and forcing a reset
Texas law provides a serious consequence if the sampling method is improper: if the taxpayer demonstrates the Comptroller’s sampling method was not in accordance with generally recognized sampling techniques, the projected portion of the assessment may be invalidated and the Comptroller may perform a new audit using a revised method.
This is not a simple objection. It is typically a structured challenge supported by the sample design details (unit definition, selection method, sample size, base computation, and population criteria), which is why the written notification content matters so much.
If you believe the sample design is flawed, you can create a free account with Sales Tax Helper to analyze the notice details, identify weaknesses in the plan, and prepare a defensible challenge strategy.
How To Protect Yourself
When sampling and projection are part of a Texas sales tax audit, focus on the following:
- Control the population: confirm the population criteria matches how your business operates and avoid mixed populations that can inflate error rates
- Prioritize documentation early: focus on exemption, resale, and purchase-side support for likely sample categories before error rates are finalized
- Identify non-representative items: isolate unusual periods or transactions and build support to exclude them from the sample
- Review the sampling notice: confirm that written notice is complete, timely, and consistent with Texas requirements
- Evaluate the sampling method: determine whether the approach aligns with generally accepted techniques and whether projected results can be challenged
FAQ
Can the Texas Comptroller use sampling in a Texas sales tax audit?
Yes. Texas Tax Code § 111.0042 authorizes sampling methods in audits when statutory criteria are met.
When is sampling considered appropriate under Texas law?
When records are voluminous/complex, inadequate/insufficient, or when full detailed auditing cost would be unreasonable and sampling will produce a reasonable result.
Does Texas have to notify me before sampling?
Yes. Texas law requires written notice of the sampling procedure before using sampling to establish liability. The Comptroller’s sampling chapter also states notice must be provided no later than after examining 25% of the sample.
What if the sample month is not normal for my business?
Texas law requires the sample reflect normal business conditions as nearly as possible. If you can show a transaction is not representative, the demonstrated non-representative transactions should be removed from the sample and separately assessed
Can I challenge the sampling method itself?
Yes. If you demonstrate the sampling method was not in accordance with generally recognized sampling techniques, projection-based portions can be dismissed and a new audit may be performed.
Where can I see what Texas includes in sampling procedure documentation?
The Comptroller’s Sampling Manual contains a detailed notification template showing the types of items included (records examined, sampling unit, selection method, sample size, sample base, population base, and population criteria).
Next Steps
If sampling is being used in your Texas sales tax audit, do not wait until projections are finalized. The earlier you define the population, address documentation gaps, and identify non-representative transactions, the more likely the results will reflect your actual operations rather than a distorted sample.
By creating a free account with Sales Tax Helper, you can evaluate the sampling approach, build a normal-conditions defense, and develop a structured, evidence-backed strategy to reduce projected exposure.