If you are registered for purposes of New York State's sales tax you are a trustee of New York State and you have a responsibility to collect the proper amount of sales tax from your customers and to remit the tax you have collected with your timely filed sales tax return.
As a registered sales tax vendor, you are required to keep accurate records of all sales and purchases that you make. Keeping detailed records of your business operation will help you prepare accurate and complete sales tax returns. Detailed records will also serve as documentation of the accuracy of your returns if you are audited.
While this bulletin does not provide an exhaustive list of the records you must keep, it does give an overview of those records and references to more resources on recordkeeping requirements.
Video: Sales Tax Record
Keeping Requirements
When you file a sales tax return, it must show:
All of your records must be dated and kept in good order. Your records must provide sufficient detail to independently determine the taxable status of each sale and the amount of tax due and collected. You must be able, through your records, to connect an exempt sale to a particular purchaser to the exemption certificate you have on file for that sale or purchaser. If you issue an exemption certificate when you make a purchase, you must maintain a record of the purchase and be able to prove the exempt use.
You must keep records of every sale, the amount of the sale, and the sales tax on the sale. Your must retain a true copy of each:
If no written document is given to the purchaser, you must keep a detailed daily record of all cash and credit sales in a daybook or similar journal. Ask your accountant for help if you aren’t sure how to do this.
If you sell both taxable and nontaxable goods or services, you must identify which of the items you sell are subject to sales tax and which are not on the invoice or receipt. For example, a cash register tape must list each item sold with enough detail to determine whether that item is subject to sales tax. You must always separately state the amount of sales tax due on the invoice or receipt that you give your customer. For more information, see Tax Bulletin Taxable Receipt (TB-ST-860).
If you deliver the product or service to a place other than your place of business, you must maintain records that prove where delivery took place. A special rule applies to motor vehicles, trailers, and certain boats. For more information, see Publication 750, A Guide to Sales Tax in New York State.
Records must be maintained to establish the taxable status of all purchases of property or services. Purchase records should include records related to:
Purchase records must substantiate all your expenses and your cost of goods sold. These records should also show that your business’s purchases bear a reasonable relationship to your business’s sales.
You should also keep any other record or document that, given the nature of your business, would be necessary to prove that you have collected and paid the proper amount of sales or use tax due.
POS systems are utilized to record sales to a business's customers. In many ways, POS systems take the place of a traditional cash register. If your business uses a POS system, you must comply with the rules and requirements outlined in this section.
When using POS systems, all sales and transactions are made through a computer system. The system records what you're selling, the selling price, and the quantity sold. Then it calculates the total due, including tax, and tells you how much change is due. The system should record every sale and track all transactions.
Each POS transaction record must provide enough detail to independently determine the taxability of each sale and the amount of tax due and collected. Detailed information required for each sales transaction includes, but is not limited to the:
Summary documents should be designed so that the details underlying the documents, such as invoices and vouchers, may be identified and made available upon request.
Any additional reports and schedules relating to the preparation of the tax return must be maintained and made available upon request.
Detailed information required for each purchase transaction includes, but is not limited to the:
Any related inventory system must also be maintained and made available upon request.
Any additional purchase reports, schedules or documentation that reconcile to other books and records, such as purchase journals or a general ledger, must be maintained and made available upon request.
In order to be considered complete, the electronic records must permit the direct reconciliation of the receipts, invoices, and other source documents with the entries in the books and records and on the returns of a taxpayer. If this reconciliation is not possible, the records may be deemed inadequate to permit a detailed audit and another audit methodology (such as a sampling) may be used.
Users of POS systems must maintain auditable internal controls to ensure the accuracy and completeness of the transactions recorded in the POS system.
The records must provide the opportunity to trace any transaction back to the original source or forward to a final total.
Audit trail details include, but are not limited to:
The POS audit trail or logging functionality must be activated and operational at all times, and it must record:
Failure to have the POS audit trail or logging functionality activated and performing these functions is evidence of a lack of POS system internal controls.
Any and all documentation describing the automated data processing of the POS system must be made available upon request.
You must keep all of your records for a minimum of three years from the due date of the return to which those records relate, or the date the return is filed, if later. You must make the records available to the Tax Department upon request. The Tax Department may require you to keep records for a longer period of time, such as when the records are the subject of an audit, court case, or other proceeding.
If you use a POS system and your system lacks the storage capacity to comply with the three-year retention period, you must transfer, maintain, and have available in a machine-sensible and auditable form 1 any data that has been removed from the POS system. If you change POS systems, you must ensure that the data from the old system is transferred, maintained, and available in a machine-sensible and auditable form.
If you maintain records in an electronic format, all the requirements for paper records also apply to records created and stored electronically. Records that are maintained in an electronic format must be made available to the Tax Department in an electronically readable form. See Publication 132, Computer-Assisted Audits - Guidelines and Procedures for Sales Tax Audits.
Your records may be considered inadequate if:
If your records are considered inadequate, you may:
See Publication 131, Your Rights and Obligations Under the Tax Law, and Tax Bulletin Sales and Use Tax Penalties (TB-ST-805).
Additional recordkeeping requirements apply for vendors in the following businesses:
1 Machine-sensible and auditable form means that the data should be stored in a commonly used format and not stored or presented to the department in a format readable only by proprietary software. (back)
Note: A Tax Bulletin is an informational document designed to provide general guidance in simplified language on a topic of interest to taxpayers. It is accurate as of the date issued. However, taxpayers should be aware that subsequent changes in the Tax Law or its interpretation may affect the accuracy of a Tax Bulletin. The information provided in this document does not cover every situation and is not intended to replace the law or change its meaning.
Tax Law: Sections 1132(c); 1135; 1138(a); 1142(5); and 1145(i), (j), (k)
Regulations: Sections 533.2; 541.3; 541.5; and Part 2402
Publications:
Publication 20, New York State Tax Guide For New Businesses
Publication 131, Your Rights and Obligations Under the Tax Law
Publication 132, Computer-Assisted AuditsGuidelines and Procedures for Sales Tax Audits
Publication 750, A Guide to Sales Tax in New York State
Publication 900, Important Information for Business Owners
Memoranda:
TSB-M-81(9)S, Records Required to Be Kept by Sales Tax Vendors
TSB-M-85(5)S, Vendor Responsibilities in the Collection of Sales Tax
