Kansas Administrative Regulations

Regulation Number:92-19-4b
Agency Title: KANSAS DEPARTMENT OF REVENUE
Article Title: Kansas Retailers' Sales Tax
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Recordkeeping requirements.
Keywords:
Effective Date:07/27/2001


Body:

92-19-4b. Recordkeeping requirements. (a) Purpose.
Each taxpayer shall maintain the books, records,
and other information required to be maintained by the
Kansas retailers’ sales tax act in accordance with this regulation.
(b) Definitions. For purposes of this regulation, these
terms shall be defined as follows:
(1) ‘‘Database management system’’ means a software
system that controls, relates, retrieves, and provides accessibility
to data stored in a database.
(2) ‘‘Director’’ means the director of taxation of the department
of revenue or the director’s designee.
(3) ‘‘Electronic data interchange’’ or ‘‘EDI technology’’
means the computer-to-computer exchange of business
transactions in a standardized, structured electronic format.
(4) ‘‘Hard copy’’ means any documents, records, reports,
or other data printed on paper.
(5) ‘‘Machine-sensible record’’ means a collection of related
information in an electronic format. This term shall
not include hard-copy records that are created or recorded
on paper or stored in or by an imaging system,
including microfilm, microfiche, and storageonly imaging
systems.
(6) ‘‘Storage-only imaging system’’ means a system of
computer hardware and software that provides for the
storage, retention, and retrieval of documents originally
created on paper. This term shall not include any system,
or part of a system, that manipulates or processes any
information or data contained on the document in any
manner other than to reproduce the document in hard
copy or as an optical image.
(7) ‘‘Taxpayer’’ means any person who is obligated to
account to the director of taxation for taxes collected or
accrued under the Kansas retailers’ sales tax act.
(c) Recordkeeping requirements: general.
(1) Each taxpayer shall maintain all records that are
necessary to determine the correct tax liability under Kansas
sales and compensating tax acts. All required records
shall be made available on request by the director as provided
for in K.S.A. 79-3609, and amendments thereto.
These records shall include the following:
(A) Invoices;
(B) bills of lading;
(C) sales records;
(D) copies of bills of sale;
(E) exemption certificates;
(F) a true and complete inventory taken at least once a
year; and
(G) all other pertinent documents that establish gross
receipts from sales, as well as any deductions allowed by
law or claimed on returns.
(2) If a taxpayer retains records that are required to be
retained under this regulation in both machine-sensible
and hard-copy formats, that individual shall make the
records available to the director in machine-sensible format
upon request of the director.
(3) Nothing in this regulation shall be construed to prohibit
any taxpayer from demonstrating tax compliance
with traditional hard-copy documents or reproductions
of them, in whole or in part, whether or not the taxpayer
also has retained or has the capability to retain records
using electronic or other storage media in accordance
with this regulation. However, this subsection shall not
relieve the taxpayer of the obligation to comply with paragraph
(c)(2).
(d) Recordkeeping requirements: machine-sensible records.
(1) General requirements.
(A) Machine-sensible records used to establish tax compliance
shall contain sufficient transaction level detail information
so that the details underlying the machine-sensible
records can be identified and made available to the
director upon request. Any taxpayer may discard duplicated
records and redundant information if the taxpayer’s
responsibilities under this regulation are met.
(B) At the time of an examination, the retained records
shall be capable of being retrieved and converted to a
standard record format.
(C) Taxpayers shall not be required to construct machine-
sensible records other than those created in the ordinary
course of business. A taxpayer who does not create
the electronic equivalent of a traditional paper document
in the ordinary course of business shall not be required
to construct the record in an electronic format for tax purposes.
(2) Electronic data interchange requirements.
(A) If a taxpayer uses electronic data interchange processes
and technology, the level of record detail, in combination
with other records related to the transactions,
shall be equivalent to that contained in an acceptable paper record.
The retained records shall contain the following information:
(i) The vendor name;
(ii) the invoice date;
(iii) a product description;
(iv) the quantity purchased;
(v) the price;
(vi) the amount of tax;
(vii) an indication of tax status;
(viii) the shipping detail; and
(ix) any other information required by the secretary.
Codes may be used to identify some or all of the data
elements, if the taxpayer provides a method that allows
the director to interpret the coded information.
(B) The taxpayer may capture the information necessary
to satisfy the requirements of paragraph (d)(2)(A) at
any level within the accounting system and shall not be
required to retain the original EDI transaction records if
the audit trail, authenticity, and integrity of the retained
records can be established.
(3) Electronic data processing systems requirements.
The requirements for an electronic data processing accounting
system shall be similar to those for a manual
accounting system, in that an adequately designed accounting
system shall incorporate methods and records
that will satisfy the requirements of this regulation.
(4) Business process information.
(A) Upon the request of the director, the taxpayer shall
provide a description of the business process that created
the retained records. This description shall include the
relationship between the records and the tax documents
prepared by the taxpayer, and the measures employed to
ensure the integrity of the records.
(B) Each taxpayer shall be capable of demonstrating the
following:
(i) The functions being performed as they relate to the
flow of data through the system;
(ii) the internal controls used to ensure accurate and
reliable processing; and
(iii) the internal controls used to prevent the unauthorized
addition, alteration, or deletion of retained records.
(C) The following documentation shall be required for
machine-sensible records retained as specified in this regulation:
(i) Record formats or layouts;
(ii) field definitions, including the meaning of all codes
used to represent information;
(iii) file descriptions, including the data set name; and
(iv) detailed charts of accounts and account descriptions.
(e) Records maintenance requirements.
(1) The taxpayer shall adequately catalog and preserve
electronic and other retained machine-sensible records.
(2) The taxpayer’s computer hardware or software shall
accommodate the extraction and conversion of retained
machine-sensible records.
(f) Access to machine-sensible records.
(1) The manner in which the director is provided access
to machine-sensible records as required in paragraph
(c)(2) may be satisfied through a variety of means, each
of which shall take into account the taxpayer’s facts and
circumstances through consultation with the taxpayer.
(2) The access shall be provided in one or more of the
following manners:
(A) The taxpayer may arrange to provide the director
with the hardware, software, and personnel resources to
access the machine-sensible records.
(B) The taxpayer may arrange for a third party to provide
the hardware, software, and personnel resources
necessary to access the machine-sensible records.
(C) The taxpayer may convert the machine-sensible records
to a standard record format specified by the director,
including copies of files, on a magnetic medium that
is approved by the director.
(D) Other means of providing access to the machine-sensible
records may be agreed upon by the taxpayer and
director.
(g) Taxpayer responsibility and discretionary authority.
(1) In conjunction with meeting the requirements of
subsection (d), a taxpayer may create files solely for the
use of the director, including a file that contains the transaction-
level detail from the data base management system
and that meets the requirements of subsection (d).
The taxpayer shall document the process that created any
separate file to show the relationship between that file
and the original records.
(2) Any taxpayer may contract with a third party to
provide custodial or management services of the records.
A third-party contract shall not relieve the taxpayer of
the taxpayer’s responsibilities under this regulation.
(h) Alternative storage media.
(1) For purposes of storage and retention, taxpayers
may convert hard-copy documents received or produced
in the normal course of business and required to be retained
under this regulation to microfilm, microfiche, or
other storage-only imaging systems and may discard the
original hard-copy documents, if the conditions of this
subsection are met. Documents that may be stored on
these media shall include the following:
(A) General books of account;
(B) journals;
(C) voucher registers;
(D) general and subsidiary ledgers; and
(E) supporting records of details, including sales invoices,
purchase invoices, exemption certificates, and
credit memoranda.
(2) Microfilm, microfiche, and other storage-only imaging
systems shall meet the following requirements:
(A) The taxpayer shall maintain, and make available on
request, documentation establishing the procedures for
converting the hard-copy documents to microfilm, micro-fiche,
or other storage-only imaging system. The documentation
shall contain, at a minimum, a description sufficient
to allow an original document to be followed
through the conversion system as well as internal procedures
established for inspection and quality assurance.
(B) The taxpayer shall establish procedures for the effective
identification, processing, storage, and preservation
of the stored documents and for making them available
for the period they are required to be retained under
subsection (j). (C) Upon request by the director, the taxpayer shall
provide facilities and equipment for reading, locating,
and reproducing any documents maintained on micro-film,
microfiche, or other storage-only imaging system.
(D) When displayed on equipment or reproduced on
paper, the documents shall exhibit a high degree of legibility
and readability. For this purpose, ‘‘legibility’’
means the quality of a letter or numeral that enables the
observer to identify it positively and quickly to the exclusion
of all other letters or numerals. ‘‘Readability’’ means
the quality of a group of letters or numerals being recognizable
as words or complete numbers.
(E) All data stored on microfilm, microfiche, and other
storage-only imaging systems shall be maintained and arranged
in a manner that permits the location of any particular
record.
(F) There shall be no substantial evidence that the microfilm,
microfiche, or other storage-only imaging system
lacks authenticity or integrity.
(i) Effect on hard-copy recordkeeping requirements.
(1) Except as otherwise provided in this regulation, the
provisions of this regulation shall not relieve taxpayers
of the responsibility to retain hard-copy records that are
created or received in the ordinary course of business as
required by existing law and regulations. Hard-copy records
may be retained using a recordkeeping medium as
specified in subsection (h).
(2) If hard-copy records are not produced or received
in the ordinary course of transacting business, including
when electronic data interchange technology is used,
hard-copy records shall not be required to be produced
simply for the purpose of maintaining hard-copy records.
(3) The taxpayer shall retain hard-copy records generated
at the time of a transaction using a credit or debit
card, unless all the details necessary to determine correct
tax liability relating to the transaction are subsequently
received and retained by the taxpayer in accordance with
this regulation. These details shall include those listed in
paragraph (d)(2)(A).
(4) Computer printouts that are created for validation,
control, or other temporary purposes shall not be required
to be retained.
(5) Nothing in this regulation shall prevent the director
from requesting hard-copy printouts in lieu of retained
machine-sensible records at the time of examination.
(j) Record retention: time period. All records required
to be retained under this regulation shall be preserved
pursuant to K.S.A. 79-3609 and amendments thereto, unless
the director has advised the taxpayer in writing that
the records are no longer required.
(Authorized by K.S.A. 2000 Supp. 79-3618 and K.S.A. 79-3707; implementing
K.S.A. 2000 Supp. 79-3609, K.S.A. 79-3702, and K.S.A. 2000 Supp. 79-3706; effective July 27, 2001.)