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Massachusetts Seeks Tighter POS System Recordkeeping Requirements

  • Dec 5, 2014 | Gail Cole

 Before tax zappers.gister

The first time I encountered a hand-held point-of-sale device was at the Seattle REI during a crowded annual sale. A clerk appeared with device in hand just as I was beginning to dread the impending check-out line. In the blink of an eye the sales transaction was complete. It was brilliant.

Point of sale (POS) systems, including mobile POS systems like the hand-held device used by the REI clerk, are Massachusetts Department of Revenue (DOR) is working to educate Massachusetts vendors on POS system recordkeeping requirements. The DOR working draft directive provides “additional guidance with respect to the recordkeeping and record retention requirements applicable to sales/use tax vendors, particularly in connection with the use of Point of Sale (POS) systems.”

In the event of an audit, the DOR relies on records “to verify what was sold and whether the appropriate amount of tax was collected.” Accurate recordkeeping facilitates that process; inaccurate records hamper it. It behooves businesses to record all transactions as accurately as possible, since the Department of Revenue is permitted to use an alternate audit methodology when records are inadequate or inaccurate.

At minimum, POS systems should collect the following information:

  • Individual item(s) sold
  • Selling price
  • Tax due
  • Invoice number
  • Date of sale
  • Method of payment
  • POS terminal number and POS transaction number

According to the directive, “In order to be considered complete, 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.” POS systems should also provide audit trail details, which enable auditors to trace transactions back to the original source or forward to a final total.

POS systems must have the storage capacity to retain records for a period of three years. Businesses with systems lacking that capacity must be able to transfer and maintain all the data “in a machine-sensible and auditable form.”

Inadequate records:

  • Do not verify sales receipts
  • Do not verify whether those receipts are subject to tax
  • Do not provide details of each individual transaction
  • Do not verify the taxable status of purchases
  • Do not show that a business’s purchases correlate to is sales

In addition, records may also be deemed inadequate if it isn’t possible to conduct a complete audit based on them, or if they are not made available to the auditor, or if they are not in a usable form.

Additional information, including the type of records that must be maintained, is available in the working draft directive, Recordkeeping Requirements for Sales and Use Tax Vendors Utilizing Point of Sale Systems.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.