N.J. Admin. Code § 18:2-7.11

Current through Register Vol. 56, No. 24, December 18, 2024

Section 18:2-7.11 - Corporations

(a) Corporations are required to maintain all records used to determine their tax liabilities and such other records as the Director of the Division of Taxation may require, pursuant to N.J.S.A. 54:10A-14.1. Corporations that are required to collect Sales and Use Tax shall keep records of every purchase, purchase for lease, sale or amusement charge or occupancy of all amounts paid, charged or due thereon pursuant to N.J.S.A. 54:32B-16, including contemporaneous sales records, such as cash register tapes and journals, sales slips, invoices, receipts or memoranda of price (see N.J.A.C. 18:24-2). Corporations that operate primarily on a cash basis and that deal primarily in cash purchases and sales, including, but not limited to, family-owned restaurant corporations, must maintain sufficient records for the determination of the corporation's Corporation Business Tax and Sales and Use Tax liabilities.

(b) If a corporation has not maintained records adequate to classify the corporation's income for purposes of establishing tax liabilities, the Division may make an audit determination that certain amounts of unreported income have been distributed to shareholders of the corporation, in the form of salary or dividends. Amounts that cannot be identified as arising from some aspect of the operations of the business will first be deemed to have been distributed to the shareholders as reasonable salary, and includable in the income of the shareholders for purposes of the gross income tax pursuant to N.J.S.A. 54A:5-1.a. Amounts beyond salary will be deemed to have been distributed to the shareholders as a dividend, and includable in the income of the shareholders for purposes of the gross income tax pursuant to N.J.S.A. 54A:5-1.f. The Division will utilize commonly accepted auditing practices to make these determinations. Examples of commonly accepted auditing practices are comparisons with other similarly situated businesses and analyses of information provided by vendors to the business.

Amended by 47 N.J.R. 3150(a), effective 12/21/2015