Publication 116, Sales and Use Tax Records

May 2014

  • Record
    requirements
  • Types of Records
  • Detailed
    Records
  • Retaining
    Records
  • Confidentiality
  • Additional
    Information

If you hold a California seller’s permit, you are required to maintain business records to verify that you have properly paid tax. This publication describes the general sales and use tax recordkeeping requirements for most businesses. Please note that recordkeeping requirements for other state, local, and federal taxes and fees may differ from those described here.

Why do I have to keep records?

In general, you are required to maintain business records so that Board of Equalization (BOE) representatives may:

  • Verify the accuracy of your sales and use tax returns; and
  • Determine if you have correctly paid the tax due on your sales and purchases.

If the BOE audits your account and finds that your records are not adequate, we will use standard accounting methods to determine how much tax you should have paid. In addition, a lack of complete, accurate records may be considered negligence or intent to evade the tax on your part, and you may have to pay penalties as a result.

Sales Suppression Software Programs and Devices

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.

Using these devices gives an unfair competitive advantage over business owners who comply with the law and pay their fair share of taxes and fees. Violators could face up to three years in county jail, fines of up to $10,000, and will be required to pay all illegally withheld taxes, plus penalties including applicable interest and fees.

Note: This publication summarizes the law and applicable regulations in effect when the publication was written, as noted above. However, changes in the law or in regulations may have occurred since that time. If there is a conflict between the text in this publication and the law, decisions will be based on the law and not this publication.

What kinds of records should I keep?

Keep all records required to determine your correct sales and use tax liability, including:

  • Normal books of account that show your business income and expenses (see What should my records show?, below);
  • Documents of original entry, such as invoices, receipts, job orders, purchase orders, contracts, or other documents used as the basis for your books of account; and
  • All schedules or working papers used in preparing your sales and use tax returns.

There are specific recordkeeping requirements for businesses whose sales and use tax transactions are more complex, such as bars and restaurants, construction contractors, and motor vehicle dealers. For details, please see our industry-specific publications or call our Customer Service Center at 1-800-400-7115.

What should my records show?

Your records need to show:

  • The gross receipts from all of your business income, including sales, leases, service charges, and labor income;
  • All of the deductions claimed on your sales and use tax returns, along with support documents for those deductions; and
  • The total purchase price, including receipts, for all items you purchase for; resale, lease, or your own use.

How detailed should my sales records be?

The level of required detail varies by industry. In any case, the BOE must be able to determine the date of the sale, what you sold, all taxable and nontaxable charges, and how much tax was applied to the sale. Individual sales invoices should generally include the date, customer’s name and address, shipping address, type of product, quantity sold, sales price, any shipping charges, and the amount of tax. But if, for example, you operate a grocery store whose original sales records are register tapes, you obviously will not have that much detail for each sale.

If you have made nontaxable sales, it is important to keep documents to verify that tax did not apply. Such documents include resale certificates, exemption certificates, shipping invoices, bills of lading, and so forth. For more information on documenting sales for resale, please see Sales for Resale, publication 103. If you make other kinds of nontaxable sales, please check with us regarding required documentation.

Do my records have to be in any particular form?

Your sales and use tax records can be in paper or electronic form or kept on storage media such as removable disks or film. If you keep electronic or film records, you need to make sure that you will be able to print them for us upon request. For more information on requirements for records kept in electronic form or on film storage media, see Regulation 1698, Records.

How long should I keep my business records?

Keep required records for at least four years unless the BOE gives you specific, written authorization to destroy them sooner.

Exception: Records that cover reporting periods before January 1, 2003, may be covered by an extended statute of limitations if you did not participate in the 2005 Tax Amnesty Program. You must keep those records for at least ten years.

If you are being audited, retain all records that cover the audit period until the audit is complete, even if that means keeping them longer than four years. In addition, if you have a dispute with us about how much tax you owe, it is important to retain the related records until that dispute is resolved. For instance, if you appeal the results of an audit or another determination (billing), or file a claim for refund, keep your records while that matter is pending.

For more information, please refer to Regulation 1698, Records or call our Customer Service Center at 1-800-400-7115.

Does the BOE keep my records confidential?

Your records are generally covered by state laws that protect your privacy. However, under certain circumstances we may release to the public the information printed on your seller’s permit, account start and closeout dates, and names of business owners or partners. We may also share information regarding your account with certain state and federal agencies, with local governments, and with private firms authorized to represent them. When you sell a business, we can give the buyer or other involved parties information regarding your outstanding tax liability. With your written permission, we can release information regarding your account to your accountant, your attorney, or any other person you designate.

For more information

Publications

How to Inspect and Correct Your Records 58-A

Sales Delivered Outside California 101

Sales for Resale 103

Regulations

1698 Records

Forms

BOE-392 Power of Attorney