Idaho Admin. Code r. 35.01.02.111 - RECORDS REQUIRED AND AUDITING OF RECORDS

01. In General. Every retailer doing business in this state and every buyer storing, using, or otherwise consuming in this state tangible personal property will keep complete and adequate records as may be necessary for the Commission to determine the amount of sales and use tax for which that person is liable under Title 63, Chapter 36, Idaho Code. (3-31-22)

a. Unless the Commission authorizes an alternative method of record keeping in writing, these records will show gross receipts from sales or rental payments from leases of tangible personal property, including any services that are a part of the sale or lease, made in this state, irrespective of whether the retailer or buyer regards the receipts to be taxable or nontaxable; all deductions allowed by law and claimed in filing the return; and the total purchase price of all tangible personal property purchased for sale or consumption or lease in this state. (3-31-22)

b. These records include the normal books of account ordinarily maintained by the average prudent businessman engaged in such business, together with all bills, receipts, invoices, cash register tapes, or other documents of original entry supporting the entries in the books of account, together with all schedules or working papers used in connection with the preparation of tax returns. (3-31-22)

c. For taxpayers that maintain the required records in both a machine-sensible and a hard-copy format, that taxpayer will make the records available to the Commission in machine-sensible record format upon the Commission's request. Machine-sensible records are to be maintained in the original format for the same time periods as required of hard-copy records outlines in Subsection 111.04 of this rule. "Machine-sensible record" is a collection of related information in an electronic format. This does not include hard-copy records that are created or recorded on paper or stored in or by an imaging system such as microfilm, microfiche or storage-only imaging systems. (3-31-22)

02. Alternative Storage Media. Records, including general books of account, such as cash books, journals, voucher registers, ledgers, and like documents may be microfilmed, microfiched, or retained by a storage-only imaging system and the original hard-copy documents may be discarded when all other conditions of this rule are met. A storage-only imaging system involves computer hardware, software, and other reproduction equipment that provides for the storage, retention, and retrieval of records and documents which were originally created on paper. It does not allow for any manipulation or processing of the documents. These records are to be authentic, accessible, readable, and meet the following requirements: (3-31-22)

a. Appropriate facilities are to be provided for preservation of the storage media for the periods required and open to examination and the taxpayers will provide transcriptions of any information on microfilm, microfiche, or imaged data which may be required for verification of tax liability. (3-31-22)

b. All microfilmed, microfiched, and imaged data are to be indexed, cross-referenced, and labeled to show beginning and ending numbers and to show beginning and ending alphabetical listing of documents included, and systematically filed to permit ready access. (3-31-22)

c. The taxpayer will make available upon request of the Commission facilities and equipment in good working order at the examination site for reading, locating, and reproducing any record concerning sales or use tax liability maintained on microfilm, microfiche, or other storage-only imaging system. (3-31-22)

d. The taxpayer will set forth in writing the procedures governing the establishment of its microfilm, microfiche, or other storage-only imaging system and the individuals who are responsible for maintaining and operating the system with appropriate authorization from the Board of Directors, general partners, or owner, whichever is applicable. (3-31-22)

e. The microfilm, microfiche, or other storage-only imaging system is to be complete and used consistently in the regularly conducted activity of the business. (3-31-22)

f. The taxpayer will establish procedures with appropriate documentation so that the original document can be followed through the conversion system. (3-31-22)

g. The taxpayer is responsible for the effective identification, processing, storage, and preservation of microfilm, microfiche, or other storage-only imaging system making it readily available for as long as the contents may become material in the administration of any state tax law. (3-31-22)

h. The taxpayer is to keep a record identifying by whom the microfilm, microfiche, or other storage-only image system was produced. (3-31-22)

i. When displayed or reproduced on paper, the material is to exhibit a high degree of legibility and readability. For this purpose, legibility is defined as the quality of a letter or numeral that enables the observer to identify it positively and quickly to the exclusion of all other letters or numerals. Readability is defined as the quality of a group of letters or numerals being recognizable as words or complete numbers. (3-31-22)

j. All production of microfilm or microfiche and processing duplication, quality control, storage, identification, and inspection thereof are to meet acceptable industry standards. (3-31-22)

03. Records Prepared by Automated Data Processing Systems, ADP. An ADP tax accounting system may be used to provide the records required for the verification of tax liability. Although ADP systems will vary from one taxpayer to another, all such systems are to include a method of producing legible and readable records which will provide the necessary information for verifying such tax liability. The following requirements apply to any taxpayer who maintains any such records on an ADP system: (3-31-22)

a. Recorded or reconstructible data. ADP records will provide an opportunity to trace any transaction back to the original source or forward to a final total. If detailed printouts are not made of transactions at the time when they are processed, the systems are to have the ability to reconstruct these transactions. (3-31-22)

b. General and subsidiary books of account. A general ledger, with source references, is to be written out to coincide with financial reports for tax reporting periods. In cases where subsidiary ledgers are used to support the general ledger accounts, the subsidiary ledgers will also be written out periodically. (3-31-22)

c. Supporting documents and audit trail. The audit trail is to be designed so that the details underlying the summary accounting data may be identified and made available to the Commission upon request. The system is to be so designed that supporting documents, such as sales invoices, purchase invoices, credit memoranda, and like documents are readily available. (3-31-22)

d. Program documentation. A description of the ADP portion of the accounting system are to be made available. The statements and illustrations as to the scope of operations be sufficiently detailed to indicate: The application being performed; the procedures employed in each application, which, for example, might be supported by flowcharts, block diagrams, or other satisfactory descriptions of the input or output procedures; the controls used to insure accurate and reliable processing; and important changes, together with their effective dates, are to be noted in order to preserve an accurate chronological record. (3-31-22)

e. Data storage media. Adequate record retention facilities are to be available for storing tapes and printouts, as well as all supporting documents as may be required by law or this rule. (3-31-22)

04. Record Retention. All records pertaining to the transactions involving sales or use tax liability are to be preserved for a period of not less than four (4) years. If an assessment has been made and an appeal to the Commission or any court is pending, the books and records relating to the period under appeal by such proposed assessment must be preserved until final disposition of the appeal. (3-31-22)

05. Examination of Records. All of the foregoing records are to be made available for examination on request of the Commission or its authorized representatives. (3-31-22)

06. Failure of the Taxpayer to Maintain or Disclose Complete and Adequate Records. Upon failure by the taxpayer, without reasonable cause, to substantially comply with the requirements of this rule, the Commission will: (3-31-22)

a. Impose any penalty as may be authorized by law. (3-31-22)

b. Subpoena attendance of the taxpayer and any other witness when the Commission deems it necessary or expedient for examination and compel the taxpayer and witness to produce any documents within the scope of its inquiry relating in any manner to the sales and use tax. (3-31-22)

c. Enter such other order as may be necessary to obtain compliance with this rule in the future by any taxpayer found not to be in substantial compliance with the requirements of this rule. (3-31-22)

Notes

Idaho Admin. Code r. 35.01.02.111