When the Texas Comptroller claims your business has nexus and should have been collecting sales tax or filing franchise tax returns, you need a clear defense strategy. Not every nexus claim is valid, and even when nexus exists, you may be able to limit your liability for prior periods.
Start by analyzing the factual basis for the Comptroller’s claim. What activities does the state believe created nexus? Physical presence claims require identifying specific employees, property, or representatives in Texas. Economic nexus claims require showing you exceeded revenue thresholds. If the Comptroller’s factual assumptions are wrong, you can dispute nexus entirely.
Timing matters in nexus analysis. Nexus must exist during the periods for which the Comptroller seeks compliance. If your Texas activities began recently, you shouldn’t owe tax for earlier periods when no nexus existed. Similarly, if your activities ended or dropped below economic thresholds, nexus may have lapsed before the periods under review.
Protected activities may negate nexus despite some Texas presence. Federal law prohibits states from imposing certain taxes on businesses whose only in-state activities involve soliciting orders for tangible goods that are approved and shipped from outside the state. This “solicitation” protection has limits, but it can be a valid defense for some businesses.
The character of your activities affects nexus analysis too. Not every Texas contact creates nexus. Occasional trade show attendance, isolated sales, and certain types of remote activities may not be sufficient. Texas must show a meaningful connection between your business and the state.
If nexus clearly existed but you weren’t collecting tax, focus on limiting your liability. Voluntary disclosure agreements remain available in some situations even after initial Comptroller contact, depending on how far the audit has progressed. Penalty waiver arguments apply regardless of whether you entered the VDA program. Statute of limitations defenses can eliminate liability for the oldest periods if the Comptroller waited too long to act.
Disputing nexus assessments requires understanding both the legal standards and the specific facts of your business. Generic arguments rarely succeed; you need to show precisely why nexus doesn’t apply to your situation or why the assessment period should be limited.
If the Comptroller is claiming your business has Texas nexus, don’t accept the assessment without analysis. Contact us for a consultation to evaluate your defense options.
