How Are Six-Figure Mixed Beverage Audit Assessments Negotiated Down?
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When a large mixed beverage assessment comes from a depletion estimate, it comes down mainly one way: by replacing the estimate’s assumptions with the business’s own records. Before the audit is billed, the Texas Comptroller offers informal routes, including a conversation with the auditor’s supervisor, a reconciliation conference, and an Independent Audit Review Conference. One limit matters for estimated audits: the Comptroller does not hold an independent review when the liability had to be estimated because records were not provided, even if the dispute is about how the estimate was calculated.
Why the number can move
The Comptroller’s rule for the tax, 34 Texas Administrative Code Section 3.1001, presumes that all alcohol purchased was sold and supplies default pour sizes, but only “in the absence of records or evidence to the contrary.” Every input to a depletion estimate, from inventory counts and pour sizes to documented allowances and the average selling price, can be replaced by the business’s own records where it has them, and each replacement moves the number.
How records move a six-figure estimate (hypothetical)
The figures are invented to show the arithmetic in the Comptroller’s depletion method; they describe no real audit. A bar’s audited liquor sales for the audit period are $1,700,000, and the auditor works from purchase data with an average price of $10 a drink. The business then produces three sets of records it kept: a corrected closing inventory count, recipes and pour-control data showing a 1.5-ounce pour, and contemporaneous logs of spills, complimentary drinks, and line cleaning.
| Step | Auditor's estimate | After the business's records |
|---|---|---|
| Bottles depleted (750 ml) | 14,000 | 13,600 (closing count corrected by 400) |
| Services per container (pour plus a 0.10-ounce allowance, rounded down) | 18 (1.25-ounce default) | 15 (1.5-ounce documented pour) |
| Servings, less documented allowances | 252,000 | 204,000 − 6,000 = 198,000 |
| Calculated sales at $10 | $2,520,000 | $1,980,000 |
| Additional taxable sales (minus $1,700,000 audited) | $820,000 | $280,000 |
| Error percentage, then × 95 percent | 48.24%, then 45.82% | 16.47%, then 15.65% |
| Adjusted additional taxable sales (× $1,700,000) | $779,000 | $266,000 |
| Tax at the two mixed beverage taxes' combined 14.95 percent, before penalty and interest | about $116,461 | about $39,767 |
For simplicity the example applies both taxes to the same base; an actual audit computes them separately. The point survives the simplification: none of the three changes required a concession from the auditor, only records the method already accepts, and together they take the estimated tax from six figures to five.
The informal routes before billing
The Comptroller’s publication Contesting Disagreed Audits, Examinations and Refund Denials (August 2026) describes the options available before the audit results are billed:
- Work with the auditor. Provide the requested records and raise disagreements as they arise. The business can speak with the auditor’s supervisor or manager at any time.
- Reconciliation conference. An informal meeting with the audit supervisor or manager, at the business or at the audit office, to try to resolve disagreements.
- Taxability guidance. When the disagreement is about how the law applies rather than about the facts, the business and the auditor can jointly ask the Comptroller’s Tax Administration for guidance, but only on a set of facts both sides agree on. The auditor submits the request and shares the answer.
- Independent Audit Review Conference (IARC). If issues remain, the business can ask for a meeting with a Comptroller employee who was not involved in the audit and is not part of the Audit Division. The request has to come after fieldwork is complete and before the audit is billed. It costs nothing, and an attorney, accountant, or other representative can attend.
The IARC is not available in several situations. The one that matters most here: when records to perform the audit were not provided and the liability had to be estimated, the business cannot use an IARC, even if it disputes how the estimate was calculated. For an estimated audit, the productive work is getting records to the auditor during fieldwork, while the estimate can still change.
Interest keeps running
An IARC does not stop interest from accruing on the proposed assessment. The Comptroller’s publication notes that paying all or part of the assessment stops interest on the amount paid.
Building the case
- Rebuild the depletion analysis by beverage class, using the business’s actual inventory counts, pours, prices, and documented losses, and show where the audit’s inputs differ.
- Organize the allowances exactly as the rule requires them to be documented; losses without the required contemporaneous records will not be allowed.
- Put disagreements in writing before the exit conference, item by item.
- Know the next step. If the dispute is not resolved before billing, the formal route is a petition for redetermination with a statement of grounds, filed by the deadline stated on the notification, a stage where the business may want professional representation.
This article is general information about Texas alcoholic beverage law, not legal advice, and reading it does not create an attorney-client relationship. Statutes and TABC rules change; confirm current requirements with the Texas Alcoholic Beverage Commission, the relevant city or county, or a licensed Texas attorney before acting.