Texas Tax Evasion and Fraud Laws

Avoiding or fraudulently filing taxes are serious crimes under federal and state laws. In Texas, tax evasion can land you in prison and also may indicate the presence of a criminal enterprise (former mob boss Al Capone, for example, was convicted on federal tax evasion charges). Since Texas does not collect personal income tax, its main source of state revenue comes from sales tax. Therefore, Texas tax evasion and fraud laws generally apply to businesses.

Failing to pay taxes or committing fraudulent acts with respect to record-keeping, including the use of technology to falsify electronic sales records, are punishable with fines and/or incarceration. The main provisions of Texas tax evasion and fraud laws are listed in the following table. See FindLaw's Tax Problems and Audits section for additional articles and resources.

Statutes Tax Code sec. 151.7032 and 151.7102; Business and Commerce Code sec. 326.001-326.002
Charges

Failing to pay sales taxes collected to the state comptroller.

Intentionally or knowingly committing various fraudulent acts with respect to books and records required to be kept by law (false entry; failure to enter required records; failure to produce records for inspection).

Using automated sales suppression devices or phantom-ware to falsify an electronic record (such as transaction reports).

Classifications and Penalties

Failure to pay (tax evasion):

  • Class C misdemeanor if less than $50;
  • Class B misdemeanor if greater than $50 but less than $500;
  • Class A misdemeanor if greater than $500 but less than $1,500;
  • State jail felony (180 days to 2 yrs) if greater than $1,500 but less than $20,000;
  • Third degree felony (2-10 yrs) if more than $20,000 but less than $100,000;
  • Second degree felony (2-20 yrs) if more than $100,000 but less than $200,000;
  • First degree felony (5-99 yrs) if greater than $200,000.

False entry / failure to enter required records: third degree felony (2-10 yrs); failure to produce records for inspection: Class C misdemeanor.

Use of automated sales suppression devices and phantom-ware: state jail felony (180 days to 2 yrs).

Additional Penalties Sales tax permits may be revoked or suspended, and future permits may be denied by the state comptroller.

Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.

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Texas Tax Evasion and Fraud Laws: Related Resources

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