California BOE Advises Sellers to Keep Good Records
- May 30, 2014 | Gail Cole
The California State Board of Equalization has updated its publication on sales and use tax records. Publication 116 explains record requirements, types of records required, the degree of detail required, required period of retention, and so forth. It’s an invaluable read for anyone required to collect and remit California sales tax.
The advice boils down to this:
- Keep detailed records of all sales transactions (including names and addresses of clients, where applicable);
- Keep detailed records of amount of sales tax collected;
- Keep detailed records of exempt transactions; and
- Keep proof that exempt transactions are lawfully exempt (such as exemption certificates and resale certificates).
When the auditor comes knocking, a business’ records must show the following information:
- Gross receipts from all business income, including sales, leases, service charges, and labor income;
- All deductions claimed on sales and use tax returns, along with supporting documentation; and
- The total purchase price, including receipts, for all items purchased for resale, lease, or your own use.
Records must be maintained for at least four years, and perhaps longer.
Don’t suppress sales
It may seem obvious but in case it isn’t, the BOE reminds that it “is a crime for anyone to knowingly sell, purchase, install, transfer or possess software programs or devices that are used to hide or remove sales and to falsify records.” In other words, pay the sales tax you owe, don't pocket it.
Auditors employed by the BOE may at any time audit a business to “verify the accuracy” of sales and use tax returns and to determine if proper taxes have been paid on a business’ sales and purchases.
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