- Before
- Runs five open audits from spreadsheets and e-mail, and finds out what the support really proves the week the response is due.
- Now
- Sees, line by line, what the auditor has and what we can prove, with one net number — and nothing is sent that he has not seen and signed.
One Texas audit, from the auditor's sample to a signed response
The Texas Comptroller is auditing Kestrel & Vane Manufacturing Texas, LLC — plants in Pasadena and Waco — for sales and use tax from January 2022 to December 2024. The auditor sampled 190 untaxed purchases and projects $1,209,944.40. It is Thursday 15 October; the response is due on Friday 30 October. Here is the work, screen by screen, in the working solution.
- 01Thursday morning
The agents worked since Tuesday; seven things need him
Leon Hart · Sales Tax ManagerLeon runs every US sales and use tax audit at Kestrel & Vane Group. His home screen says the agents matched the Texas sample, reverse-audited the same three years and drafted the reply. Across five open audits, auditors project $1,582,544; after the support the agents found, $443,779. The Texas response comes first, then the rest by date: a late vendor request, 22 matches below 95%, a California settlement call, the refund claim, the projection challenge and a new Ohio notice. The agents talk to him in the same place.
“The reply and six exhibits are drafted and cited. Nothing goes to the auditor until you approve it.”
- 02The ledger
The auditor's lines and our proof, face to face
Leon Hart · Sales Tax ManagerOn the left, the auditor's schedule: 190 sampled lines, $96,180.00 of tax claimed, factor 12.58. On the right, level with each line, our support — a certificate with the asset in exempt use, an invoice that shows the tax, or a use-tax accrual — with its source and a confidence. Filters count the lines: 148 supported, 22 to confirm, 9 being chased, 33 conceded, 2 one-off and challenged. The meter at the bottom shows the projected assessment at $286,069.20, the refund at $340,212.55 and the net position: $54,143.35 in our favour.
- 03Replay the agents' run
Support for 151 lines, and the meter falls as it goes
Matcher agentThe Matcher agent searched the certificate store, the fixed-asset register, the invoice archive, the accrual workpapers and the filed returns for every sampled line, read-only. Replayed, the lines fill in batches and the projection falls from $1,209,944.40 while the refund rises. When the archive timed out three times on line 23, it did not guess: it handed the line to the Request agent.
The Matcher agent never marks a line supported without a cited document.
- 04Before anyone sees it
A second agent re-reads every match and blocks three
Checker agentThe Checker agent re-read each proposed document on its own: the certificate names the right company, was signed before the purchase and covers the item; the invoice charges tax on the item, not the freight; the accrual sits on a filed return for the period. It kept 148 and blocked 3 — line 88 (certificate expired 31 Dec 2022), line 117 (certificate from the sister distribution company) and line 140 (tax on freight only). The 22 matches below 95% went to Priya Raman to confirm.
The Checker agent can block a match; it can never accept one on its own.
- 05Line 12
A certificate is not enough without the asset in exempt use
Priya Raman · Tax AnalystLine 12 is a compressor package for the line 3 air system from Gulfline Compressor Services: $718.81 of tax on $8,712.85, $9,042.63 once projected. The side panel shows the auditor's note — no tax charged, no exemption documentation seen — next to our proof: Form 01-339 EX-4100, the Texas exemption certificate signed 22 Sep 2020, and fixed-asset record FA-100484, Waco plant, production line, in service 1 Mar 2022. The rule is 34 TAC §3.300(d)(2). Priya accepted it with reason A1.
The source passage is highlighted on the certificate and on the asset record.
- 06A question
“Why is line 117 not supported?”
Leon Hart and the Checker agentLeon asks in plain words beside the ledger. The Checker agent answers with its sources: the certificate on file for Delmar Coatings was signed by Kestrel & Vane Distribution, Inc., not by the Texas manufacturing company. The Request agent has already asked Delmar for one from the right company, due Tue 27 Oct, inside the 5 Nov window. One click opens the line.
- 07Worked back from 5 Nov
Nine named requests, dated back from the deadline
Request agentThe Request agent planned every request backwards from Thu 5 Nov, when the certificate window closes: vendors get 10 working days, our people 5, and anything not back by 30 Oct goes in the response as “to follow”. Each request names one document and one line — invoice KPW-61548 for line 23 to Dale Okafor in Accounts Payable, a current certificate for line 88 to Lone Ridge Fabrication. REQ-07 from Brazos Packaging Co. is a day late; it reminded them and told Dale.
“I never concede a line.” — the Request agent proposes a concession with a reason code; Leon decides.
- 08The projection
Two one-off repairs, assessed once instead of × 12.58
Statistics agentThe Statistics agent rebuilt the auditor's projection — one stratum over $500, random selection, ratio projection — and found two lines that happen once: a turbine compressor rebuild after a bearing failure (line 64, $4,860 tax, projected $61,138.80) and a line 2 move in Waco (line 151, $3,420 tax, projected $43,023.60). Both sit in a general-ledger account with only these two postings in 36 months. Assessed at face value, the projection falls to $190,186.80. It asks Leon whether to raise it, and he can share it with Ruth Abernathy, the outside advisor who argues it at the exit conference.
The Statistics agent proposes; it never sends an argument to the auditor.
- 09The reverse audit
$340,212.55 of tax the vendors should not have charged
Refund agentThe Refund agent read the same three years for tax charged on exempt purchases: manufacturing equipment used in production ($171,406.20, 212 invoices), repair labour on exempt equipment ($84,215.35), electricity and gas used in manufacturing ($41,880.40, waiting on the predominant-use study) and packaging sold with the product ($21,438.15). With $21,272.45 of interest, $340,212.55 is offset in this audit. It also shows 318 invoices it would not claim — hand tools, maintenance and office supplies, and equipment rented for under a year — so nobody claims them by mistake.
Above $250,000, so Leon approves and Hannah Ostrowski, VP Tax, co-signs.
- 10Signed
He reads the cited reply, then approves and signs
Leon Hart · Sales Tax ManagerThe Response agent drafted the reply from the decisions on the ledger, every sentence cited, with six exhibits: certificates with asset records, invoices showing Texas tax paid, use-tax accruals with the returns that report them, the 33 lines accepted as taxable, the 9 documents to follow and the overpayment schedule. Paragraph 4, the projection challenge, waits for his decision. Leon picks the reason — S1, send the response as drafted — and e-signs. Every step is on the audit trail.
“I approve the response to the auditor as Leon Hart, Sales Tax Manager — e-signature.”