Texas Comptroller of Public Accounts    STAR System


AP 118

Date: May 13, 2008
To: Audit Staff
From: David Rock
Subject: Invoice Date vs. General Ledger Date

We have received a number of questions on when to use the general ledger (G/L) 
posting date and when to use the invoice date for assessment and refunds. There 
have been some recent proposed hearings decisions that address these issues in 
detail (see hearings 44,896 & 47,235 SOHA Docket NOS. 304-08-714.26 & 
304-08-0715.26 and older Comptroller hearings 21,983. 24,985, and 36,934).  The 
following guidelines are intended to address these issues in audits and 

An auditor may use the taxpayer’s accounting dates to set the audit period, 
reconcile reported amounts to books and records, and to stratify populations in 
periods that can be reconciled to the G/L.  The tax due and payable date 
(normally measured by the invoice date) is used to establish the statute of 
limitations and the tax law to be applied to the transaction. 

Texas Tax Code 111.201 limits the assessment of tax to four (4) years from the 
date the tax becomes due and payable. Section 111.107 requires a similar 
limitation on when a refund or credit may be granted. For refunds, the statute 
also requires that the due and payable date OR the date the tax is actually 
paid, whichever is later, be used to request and schedule the refund since no 
refund can be allowed before the tax was actually paid.  However, the invoice 
date will determine if the transaction is in statute.

For sales tax purposes, a “sale” or a “purchase” occurs when title or 
possession of tangible personal property is transferred or when a taxable 
service is performed.  An accrual basis taxpayer recognizes the sale at the 
time the transaction occurs and a cash basis taxpayer recognizes the sale when 
payment is received, therefore the date a sale is recognized may be different 
than the invoice date depending on how the taxpayer has chosen to report. For 
purchases, the invoice date, absent any facts to the contrary, is accepted as a 
reliable indicator of the transaction date for both accrual and cash based 

Auditors ordinarily reconcile gross sales and tax using the taxpayer’s 
accounting date, which is usually the G/L date.  Either the G/L or invoice date 
may be used to establish the population and sample bases under most conditions. 
 Whichever is used, the date the tax is due and payable MUST be used to 
establish both taxability and statute of limitations.  For example, a monthly 
filer purchases tangible personal property on July 7, 2007 and books it August 
21, 2007, so it is reported on their August return due September 20, 2007.  The 
tax on the purchase was actually due and payable on their July report due 
August 20, 2007.  Any additional tax due on the purchase must be assessed by 
August 20, 2011. Any refund of the tax paid would also have to be requested by 
August 20, 2011, but would be scheduled using the August 21, 2007 date to put 
the adjustment in the report period in which the tax was actually paid.

Example One:

The audit period for a monthly filer is January 2004 through December 2007. The 
auditor started the audit February 12, 2008. The auditor uses the G/L date to 
establish the audit period. A purchase invoice dated December 2003 and posted 
in January 2004, is out of statute as of January 20, 2008 and cannot be 
scheduled as an error or allowed as a refund item.

Example Two:

The audit period for a monthly filer is January 2004 through December 2006.  
The auditor started the audit February 12, 2007. The auditor uses the G/L date 
to establish the audit period. A purchase invoice dated December 2003 was 
posted in January 2004.  This transaction can be scheduled as an error as long 
as the audit is billed before January 20, 2008.  There is no need to expand the 
audit period to include the December 2003 report period. The auditor would need 
to schedule the transaction with a date within the audit period and footnote 
the correct invoice date and why it is being included as an adjustment.

In rare situations, and only with audit headquarters approval, a statute waiver 
could be obtained before January 20, 2008 that included the December 2003 
period.  Careful consideration must be given to the cost/benefit of the waiver 
before it is requested.  If the December 2003 period was included in a prior 
audit, the purchase invoice dated in December 2003 could still be included in 
the current audit as long as that particular transaction was not contained in 
any populations that were reviewed in the prior audit.

Example Three: 

The audit period for a monthly filer is May 2004 through July 2007. A 
self-constructed asset booked August 2004 was comprised of materials pulled 
from a valid tax-free inventory during the periods February 2004 through July 
2004.  The date the tangible personal property was removed from inventory will 
determine when the tax is due and payable. 

Example Four:

Taxpayer is a monthly filer and has requested a refund for periods January 2005 
through June 2007.  In the refund request is an invoice dated May 14, 2006, but 
booked and paid via a tax accrual in August 2007.  Assuming the basis for the 
refund request is correct, the taxpayer is entitled to a refund, but cannot 
take it in the current refund filing because the later of the tax due and 
payable date or the tax payment date would be August of 2007.  The taxpayer 
would have to request a refund for the August 2007 period in which the tax was 
paid before the statute of limitations expired for the transaction on June 20, 

Example Five:

On February 20, 2008, a monthly filing taxpayer filed a refund request for 
periods January 2004 through June 2007. In the refund request is an invoice 
dated December 15, 2003, on which tax was accrued and reported on the January 
2004 return. The tax was due and payable on the December 2003 return due on 
January 20, 2004. The refund requested for the invoice dated December 15, 2003 
should be denied as the December 2003 report period was out of statute when the 
refund claim was filed on February 20, 2008.

I am sure there are other scenarios that will come up that have not been 
addressed in this memo.  We know that populations based on the G/L dates are 
overstated in the early part of the audit and understated in the later part of 
the audit based on the taxpayers accounting practices.  The risks of loss of 
statute on transactions in future audits that are actually dated in the current 
audit period can be mitigated by planning to start the audits at an earlier 
date. There should be a cost/benefit analysis based on each individual audit.  
These issues can also be mitigated based on the choice of sample unit and 
selection used. (Random transactions samples will be more diverse than time 
period samples.)   Should you have any questions or concerns on this issue, 
contact the Area Manager of the Technical Support section of Audit 
Headquarters, the supervisor of Technical Support, or the Training Supervisor 
in Audit Headquarters.

As STAR is the Comptroller's research system for Texas tax policy issues,
only tax-specific audit policy memos (AP Memo) are included here. AP memos
not on STAR can be found on Window on State Government on the
Audit Memos web page.

DATE: 05/13/2008