taxes

General Information Letters and Private Letter Rulings: Frequently Asked Questions and Samples

Rule 3.1(c)(1)(H) states that each request for a private letter ruling must identify contrary authorities. What does that mean?

The Comptroller will consider issuing a private letter ruling when taxability guidance in statutes, rules or other controlling authorities does not exist or is not clear. The person requesting the private letter ruling needs to explain why such guidance is lacking. To provide that information, the requestor needs to identify all known contrary or contradictory authorities.

For example, a taxpayer may determine that the plain language in a controlling statute and the analysis in a final Comptroller hearing decision appear to conflict when applied to the taxpayer's particular fact situation. Or, existing Comptroller letter rulings may indicate that two different outcomes are possible under a similar set of facts. The person requesting the private letter ruling should clearly identify the conflicting authorities or other statements of policy and explain why the person's tax responsibilities are not clear and Comptroller assistance is needed.

There may be situations where a taxpayer can't find any conflicting or contrary authority. In those situations, the request should clearly explain that the taxpayer needs guidance because none exists and/or why the taxpayer is requesting guidance if there are no conflicting authorities. If there is no question as to the tax treatment that applies to a particular set of facts, there is no reason for a private letter ruling to be issued.

Even if there are no conflicting or contrary authorities, the request must explain the alternative taxability arguments that can be made in relation to the requested ruling so that the Comptroller understands why assistance is needed.

In addition, if taxability guidance exists, the Comptroller will issue a general information letter.

Rule 3.1(c)(3)(A) states that the Comptroller will not issue a private letter ruling if a person is under "an audit of any type." However, Rule 3.10(e)(5) states that the Comptroller will provide assistance if a taxpayer is under audit and needs input on taxability. How can a taxpayer get help?

To request taxability guidance from Tax Policy, a taxpayer under audit should work with the auditor to prepare a document that outlines the taxability issue and requests guidance. Tax Policy can only provide assistance when the taxpayer and the auditor agree on the underlying facts. The auditor will submit that document through Audit Headquarters to Tax Policy. Tax Policy will respond to the auditor, who will share the findings with you. Read our publication Contesting Disagreed Audits, Examinations and Refund Denials (PDF) for more information.

It is the Comptroller's intent not to issue a private letter ruling if it relates to the same type of tax as the audit. However, if the taxpayer is under audit for sales tax, for example, a private letter ruling request can be for franchise tax guidance.

The Comptroller acknowledges that some taxpayers are always under audit given their size and/or volume of taxable transactions. Taxpayers in this situation can still request a private letter ruling, and the Comptroller will take that fact into consideration. The taxpayer should make such fact clear in its request.

Rule 3.1(c)(3)(C) does not allow the Comptroller to issue a private letter ruling when a person is working with the agency's Business Activity Research Team (BART) on a Voluntary Disclosure Agreement (VDA). Can a taxpayer still receive taxability guidance to ensure accurate compliance in the future?

Yes. The Comptroller's Tax Policy Division staff will work with the taxpayer and the Audit Division to make sure any taxability issues are addressed under Rule 3.10(e)(5).

Any Tax Policy guidance applies solely to the period covered by the VDA and will not serve as a basis for detrimental reliance in the future. And, taxpayers participating in the VDA process are required to disclose their identity even with assistance from Tax Policy. Once the VDA is concluded, the taxpayer can submit a private letter ruling request and if a ruling is issued, the taxpayer can receive detrimental reliance in the future.

The taxpayer should let the auditor assigned to the VDA know they would like input from Tax Policy and provide the following information to the auditor for submission. Although no specific format is required for the request, the request should include the following information and materials:

  • The issue(s) presented
  • All relevant facts
  • Complete copies of all relevant documents, such as contracts and all relevant invoices, or representative invoices, as appropriate
  • All relevant authorities
  • Any other information that may assist in making an accurate taxability determination
Rule 3.1(c)(1)(B) and (C) require that a private letter ruling request include all relevant facts and documents. What information does the Comptroller require to comply with these requirements?

Because a private letter ruling is intended to provide guidance when none exists or when a taxpayer believes there are conflicting authorities that apply to the situation, the Comptroller needs to consider all facts that could affect a taxability determination and all relevant documents in their complete form. That means all relevant facts of a transaction need to be identified and explained in detail, and complete copies of contracts and representative invoices must be included.

When requesting a private letter ruling, is the IRS Form 2848 a valid power of attorney form? If not, what should the power of attorney document include?

No, IRS Form 2848 is not an acceptable form to use for this purpose. A power of attorney submitted with a private letter ruling request must contain the following information:

  • Taxpayer's name and identifying number (either Texas or Federal Employer Identification Number);
  • Name of the person authorizing representation of the taxpayer and his or her position which demonstrates authority to act on behalf of the taxpayer;
  • Name, address and contact information of the named representative. If the representative is an entity, the power of attorney must identify at least one person;
  • Statement explaining the scope of representation (i.e., whether the power of attorney covers only the request for a private letter ruling, all tax matters before the Comptroller, or something else); and
  • Date signed.
Can I contact someone before I submit a request to discuss whether my issue is suitable for a private letter ruling?

Yes. Contact Tax Help and include your name, phone number, email address and the tax type related to your question (e.g., franchise tax, sales and use tax, or hotel tax). A tax policy analyst will contact you to discuss your request.

Samples: Private Letter Ruling Requests

Samples of franchise and sales tax letters are on our website. These indicate the type of form and substance that will help the Comptroller quickly determine if a private letter ruling request meets the requirements of Rule 3.1.

In addition, you can review private letter rulings that the Comptroller has issued. Access the agency's State Tax Automated Research (STAR) System and search for "private letter ruling."