Potter County to repay nearly $700,000 in sales tax overpayment following audit

Potter County officials have approved a one-time repayment of nearly $700,000 after a state audit revealed that a taxpayer overpaid sales taxes that were distributed to Potter County Assistance District No. 1.

The Texas Comptroller’s Office notified the district earlier this month that a taxpayer had overpaid more than $670,000 in sales taxes between 2019 and 2022. According to county officials, the error occurred when the taxpayer incorrectly paid sales taxes on transactions that were not subject to taxation. The Texas Comptroller’s Office identified the issue during an audit.

The Potter County Assistance District, commonly known as the CAD, was established in 2017 after voter approval. The district imposes a 2% sales tax in unincorporated areas of Potter County and uses the revenue to support essential public services, including emergency response operations, road maintenance, and law enforcement.

County Auditor Brandon Boston said details surrounding the audit remain limited because of taxpayer confidentiality rules. However, he noted that the business involved operates in the manufacturing sector and holds a less common type of sales tax permit. Boston said he would not be surprised if the taxpayer continued making similar overpayments after the audit period ended in 2022, which could result in additional repayment requests in the future.

Despite the substantial repayment, county officials said the district remains in a strong financial position. As of June 17, the CAD maintained an unencumbered balance exceeding $11 million.

Revenue generated by the assistance district is distributed among several county functions. Forty percent is allocated to fire services, 30 percent supports road and bridge operations, 20 percent goes to the sheriff’s office, and the remaining 10 percent is reserved for communications equipment, including radio systems.

County commissioners considered several options for reimbursing the Comptroller’s Office. The district could have made a single lump-sum payment, entered into a repayment plan extending up to 48 months, or allowed future monthly sales tax collections to be applied toward the debt until the amount was satisfied.

During a recent commissioners court meeting, Precinct 3 Commissioner John Coffee proposed repaying the full amount immediately. Commissioners approved the recommendation, opting to settle the obligation with a one-time payment rather than spread the repayment over several years.

County officials noted that the district’s more than $11 million unencumbered balance provides sufficient resources to absorb the repayment while continuing to fund county services and operations throughout the county.