N.Y. Comp. Codes R. & Regs. tit. 20 § 533.2

Current through Register Vol. 46, No. 51, December 18, 2024

Section 533.2 - Records to be kept

Tax Law, §§ 1132(c), 1135, 1138(a), 1142(5)

(a)General.

(1) For the proper administration of the Sales and Use Tax Law and to prevent evasion of the sales tax, it is statutorily presumed that all receipts from sales and purchases of property or services of any type mentioned in subdivisions (a) through (d) of section 1105 of the Tax Law, all rents for occupancy of the type mentioned in subdivision (e) of such section, and all amusement charges of any type mentioned in subdivision (f) of such section are subject to the tax until the contrary is established. The burden of proving that any receipt, amusement charge or rent is not taxable is on the vendor or the customer. To satisfy his burden of proof, a vendor must maintain records sufficient to verify all transactions.

(2) Upon audit by the department, or at such other times as the department requests, the vendor or user must present all the records described in this Part, kept in a manner suitable to determine the correct amount of tax due, together with such documentation, summaries and schedules, including any New York State or Federal tax returns or schedules as the department may request. The vendor or user may elect to retain records as hard-copy records, electronic records, or both. Such vendor or user must provide the auditors of the department with suitable facilities for conducting their audit or examination. In those instances where the vendor or user maintains or processes records on an electronic data processing system, the department reserves the right to have such records presented on machine-sensible form, and the vendor or user must furnish access to such equipment or records as is necessary for the department to carry out its standard audit procedures. See Part 2402 of this Title concerning taxpayer record retention formats. See, also, paragraph (f)(4) of this section for specific provisions that supplement Part 2402.

(3) All records required to be kept by this Part shall be preserved for a period of three years from the due date of the return to which they relate, or the date of filing, if later, except as provided in paragraph (4) of this subdivision, and longer than three years if their contents are material to any period open or extended pursuant to statute, or in any action or proceeding pending before the Department of Taxation and Finance or in a judicial proceeding or action.

Cross-reference:

For waivers, see Part 535 of this Title. For taxable transactions, see Part 527 of this Title.

Example 1:

If a vendor applies for a refund or credit just before the statute of limitation expires and the refund or credit is pending after the statute expires, the vendor must retain all records relating to the quarter to which the refund or credit applies until a final determination is made on the application. Such records are material in the administration of the Tax Law.

Example 2:

If a vendor is audited by the department and does not agree with the audit findings, the vendor must keep all records of the audited period until a final determination is made on the audit. Such records are material in the administration of the Tax Law.

Example 3:

A department store leases cash registers for five years from an office supply company. A copy of the original lease must be retained by the lessor (the office supply company) and the lessee (the department store) until three years after the tax on the last lease payment was payable by the lessor to the Department of Taxation and Finance.

(4) Guest checks must be retained for at least three years, unless an application is filed with the District Office Audit Bureau and permission is granted by the bureau to destroy the guest checks before the expiration of the three-year statute of limitation. For form of records, see subdivision (f) of this section.

(b)Sales records.

(1) Every person required to collect tax, including every person purchasing or selling tangible personal property for resale must keep records of every sale, amusement charge, charge for dues or occupancy, and all amounts paid, charged or due thereon, and of the tax payable thereon. The records must contain a true copy of each:

(i) sales slip, invoice, receipt, contract, statement or other memorandum of sale;

(ii) guest check, hotel guest check, receipt from admissions such as ticket stubs, receipt from dues; and

(iii) cash register tape and any other original sales document.

Where no written document is given to the customer, the seller shall keep a daily record of all cash and credit sales in a day book or similar book.

(2) The sales record either must provide sufficient detail to independently determine the taxable status of each sale and the amount of tax due and collected thereon or may be substantiated by analysis of supporting records.

(i) Cash register tapes which identify the individual items sold, selling price and the tax due are sufficient to independently determine the taxable status of each sale and the amount of tax due thereon.

(ii) Cash register tapes which indicate whether each item sold is in a taxable or exempt category, but which do not identify the individual items sold, may be sufficient to prove gross sales but are not sufficient to independently determine the tax status of each sale. In this situation, other records will be required to substantiate the proper collection of tax due, such as purchases records, identification of taxable and nontaxable merchandise on display or documentation of like probative value.

(3) The seller must maintain records which substantiate points of delivery if delivery was made at a place other than his place of business. Such documents should include receipts from parcel delivery services, common carriers, unregulated truckers, the United States Postal Service, foreign freight forwarders, and logs from company vehicles. Such documents must be referenced to specific sales transactions.

(4) Exemption certificates must be dated and retained in order to prove exempt sales. Once a properly completed certificate is obtained, it relieves the seller of liability to collect the tax on transactions to which the certificate applies. Every vendor accepting an exemption certificate must maintain a method of associating a sale made for exempt purposes with the certificate on file. The burden of proving the validity of any properly completed certificate rests with the customer or other person who issues the certificate.

Cross-reference:

For the proper use of exemption certificates, see section 532.4 of this Title.

(5) Bad debts.

In support of deductions or claims for credit for bad debts, returned merchandise and cancelled sales, retailers must maintain adequate and complete records showing:

(i) date of original sale;

(ii) name and address of purchaser;

(iii) amount purchaser contracted to pay;

(iv) amount on which retailer paid tax; and

(v) all payments or other credits applied to the account of the purchaser, and the dates of such payments.

Cross-reference:

For bad debts, see Part 534 of this Title.

(6) Vending machine operators must keep records which indicate the number of machines and receipts within each taxing jurisdiction. Such records must include a copy of all contracts with owners or lessors of the premises where the various machines are located. Records must be maintained as to the number, price and receipts from each item sold in the machines. Such receipts must be supported by detailed inventory withdrawal records or similar data.

(c)Purchase records.

Every purchaser must maintain documentation to substantiate any exemption, exclusion or exception claimed on the purchase of any tangible personal property or service. The purchase records must provide sufficient detail to independently determine the taxable status of each purchase and the amount of tax due, paid or remitted thereon. Purchase documents should be categorized as follows:

(1) purchases that are subject to all taxes;

(2) purchases exempt from all taxes because for resale (inventory and raw materials);

(3) purchases that are exempt from all taxes for reasons other than for resale; e.g., purchases from an organization exempt from tax pursuant to section 1116 (a)(4) of the Tax Law;

(4) purchases that are subject only to the statewide sales tax or the New York City sales tax, or a local tax; e.g., electricity used to operate production machinery and equipment in New York City is exempt from the statewide tax but subject to the New York City sales tax.

(d)Miscellaneous records.

(1) Every vendor must maintain and make available, upon request, records and supporting documents for all exemptions, exclusions or exceptions allowed by law or claimed in filing sales and use tax returns.

(2) Records or schedules relating to the sales tax return, such as tax worksheets, general journal, ledgers, sales and purchase journals, schedules accounting for the difference between gross sales and services and taxable sales and services, must be maintained and be made available upon request.

(3) Documentation must be maintained for any refund or credit claimed.

(4) Any vendor who must file any tax returns or schedules required by the federal government, the State of New York, or any municipality within New York State, must keep a copy of all such returns or schedules and make them available to the Department of Taxation and Finance upon request.

(5) If a vendor has signed a record retention agreement with the Internal Revenue Service, the vendor must make a copy of such agreement available upon request.

(6) Vendors must maintain and make available documentation which will provide a meaningful description of their accounting system, whether manual or automated, and the records contained therein. This documentation must be adequate to explain the meaning of all entries on the records.

(7) Records.

In addition to the records required to be kept pursuant to this section, retail food stores and other participants approved for participation in the federal food stamp program are required to keep and make available to the department upon request the following:

(i) true and complete copies of applications, updates of applications and returns and reports furnished to or by the United States government or this State or their agencies in order for the vendor to participate in the food stamp program or redeem coupons issued under or pursuant to such Federal Food Stamp Act, as amended;

(ii) records of receipts indicating whether payment is by food stamps; and

(iii) true and complete copies of redemption certificates, validated by the bank; or true and complete copies of bank deposit slips or receipts showing the amount of food stamps deposited with, cashed at or otherwise tendered to the bank, validated by the bank; or both such redemption certificates and deposit slips or receipts, if available; and any other document validated by a bank as to the amount of food stamps deposited, cashed or otherwise tendered.

Cross-reference:

See section 528.27 of this Title for a definition of retail food stores and other participants, and for other provisions relating to the exemption for purchases with food stamps.

(e)Informational records.

The following information must be made available to the Department of Taxation and Finance upon request:

(1) Every vendor who leases space on his premises to another vendor to operate a leased department or concession as described in section 526.10(f) of this Title must maintain the name, address and sales tax identification number of the lessee.

(2) Every vendor operating as a co-vendor, as described in section 526.10(e) of this Title, must maintain the name, address and sales tax identification number (if any) of his co-vendor.

(3) Every person operating a social or athletic club, as described in section 527.11 of this Title, must maintain a list of its active members, life members and honorary members. This list must include:

(i) the name and address of each member;

(ii) dues and other charges accrued or received, including those claimed to be nontaxable; and

(iii) the nature, type, value and amount of all purchases, sales and services rendered.

(4) Every operator of a hotel or motel must maintain records showing the name and address of each occupant, the length of the occupancy, and all charges incurred by the occupant.

(5) Motor vehicle dealers must maintain records showing the names and addresses of their customers who purchase motor vehicles, and the receipts from such sales.

(6) Every vendor who sells a season ticket for the use of a box or seat at a place of amusement must maintain the name and address of each purchaser. In addition, every such vendor must keep a record of names and addresses of persons having the permanent use, possession, lease or a license to use a box or seat at a place of amusement.

(7) Every promoter of a show must keep a record of the date and place of each show and the name, address and certificate of authority number of every person whom he permits to display for sale or to sell tangible personal property or services subject to tax at such show.

(8) Every person subject to the inventory monitoring for underground storage facilities requirements in 6 NYCRR Part 613, as may be amended from time to time, must maintain daily inventory records for each tank (or battery of tanks if they are interconnected) and provide or make available those records upon request by the New York State Department of Taxation and Finance.

(f)Form of records.

(1)

(i) All records, including sales memoranda, purchase memoranda and records originated at the time of sale, and any other documents, books or records pertaining to tax liability and tax collections, must be dated, legible, and maintained and preserved in such manner as to disclose in readily accessible and verifiable detail the basis for and accuracy of the entries reported on the sales and use tax return.

(ii) All records originated at the time of sale may be reproduced on any photograph, photostat, microfilm, micro-card, miniature photograph or other process which actually reproduces the original record or may otherwise be retained as electronic records.

(2) Separate accounting records must be kept for each business for which a vendor has filed a certificate of registration.

(3) General books of account on microfilm. Vendors wishing to retain general books of account on microfilm may do so provided the following requirements are met:

(i) appropriate facilities are provided for preservation of the films for periods required;

(ii) microfilm rolls are indexed, cross-referenced and labeled to show beginning and ending numbers or beginning and ending alphabetical listing of documents included, and are systematically filed;

(iii) the taxpayer agrees to provide transcriptions of any information contained on microfilm which may be required for purposes of verification of tax liability; and

(iv) proper facilities are provided and available for the ready inspection and location of the particular records, including projectors for viewing and copying the records.

(4) Records prepared by automated data processing system. All punched cards, magnetic tapes, discs and other machine-sensible data media used for recording, consolidating and summarizing accounting transactions related to the taxpayer's automatic data processing system are records within the meaning of section 1142 (5) of the Tax Law and must be retained for as long as the contents may become material in determining the accuracy of any tax return required by article 28 or pursuant to the authority of article 29 of the Tax Law. However, if this information is duplicated in a hard-copy format or electronic format (see Part 2402 of this Title), such punched cards, magnetic tapes, discs or other machine-sensible records, need not be retained. An automated data processing system must comply with the following requirements:

(i) General and subsidiary books of accounts. A general ledger, with source reference, must be reconcilable with sales tax reporting periods. In cases where subsidiary ledgers are used to support the general ledger accounts, the subsidiary ledgers must also be reconcilable with such periods.

(ii) Supporting documents and audit trail. The audit trail must be designed so that the details underlying the summary accounting data, such as invoices and vouchers, may be identified and made available to the Audit Division upon request.

(iii) Recorded or reconstructable data. The records must provide the officers and employees of the department with the ability to trace any transaction back to the original source or forward to a final total. If printouts are not made of transactions at the time they are processed through the intermediate steps of a system, then the system must have the ability to reconstruct the intermediate steps and produce such printouts of transactions as necessary to carry out the department's standard audit procedures.

(iv) Data storage media. Adequate record retention facilities should be available for storing applicable supporting documents. These records must be retained in accordance with the provisions of paragraph (a)(3) of this section.

(v) Systems and program documentation. A description of the automated data processing portion of the accounting system must be available. The statements and illustrations as to the scope of operation must be sufficiently detailed to indicate:

(a) the application being performed;

(b) the procedures employed in each application;

(c) the exact method by which the computer system processes data, including but not limited to all systems and program documentation and analysis, manual system charts, flow charts, logic charts and diagrams which are necessary to understand the exact method by which the individual systems process data;

(d) the controls used to insure accurate and reliable processing;

(e) the format of any data files processed by individual systems, including a detailed description of the contents of each record; and

(f) any important changes, together with their effective dates, in order to preserve an accurate and chronological record.

(g)Incorrect or insufficient records.

(1) If the records of a taxpayer are determined to be incorrect or insufficient, the return filed on the basis of information obtained from such records may be deemed to be incorrect or insufficient. The Department of Taxation and Finance may then determine the amount of tax due the State by using any information available, whether at the taxpayer's place of business or from any other source.

(2) The records of a taxpayer may be deemed to be incorrect or insufficient if:

(i) the records are not maintained in accordance with the provisions of this section; or

(ii) an evaluation of the taxpayer's accounting system discloses that the system does not provide adequate internal control procedures which assure the accuracy and completeness of the transactions recorded in the books and records.

(3) The records of retail food stores and other participants which accept food stamps in payment of food eligible to be purchased with food stamp coupons may also be deemed to be incorrect or insufficient when (regardless of any other requirements in this section) such retail food stores and other participants fail to maintain or upon request make available to the department the records, applications, records of receipts, certificates, bank deposit slips or receipts and returns and reports required pursuant to paragraph (d)(7) of this section.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 533.2

Amended New York State Register June 8, 2016/Volume XXXVIII, Issue 23, eff. 6/8/2016