Keeping Records

  1. Am I required to keep business records?
  2. What type of records do I keep?
  3. What should my records show?
  4. How long do I keep my business records?
  5. Should I keep resale or exemption certificates that I have accepted?

Because you are required to pay the correct amount of tax and account for your business purchases and sales, it is essential you keep adequate records. For more information on keeping records, please see Regulation 1698, Records.

Note: The following information applies to the Board of Equalization. Other government agencies may have other recordkeeping requirements.

  1. Am I required to keep business records?

    Yes, you are required to keep business records so that representatives from the Board of Equalization may:

    • Verify the accuracy of sales and use tax returns
    • Determine if tax is due if a return has not been filed

    Failure to maintain accurate records may be considered evidence of negligence or intent to evade the tax and could result in penalties.

  2. What type of records do I keep?

    You must keep records that are necessary to determine the correct tax liability under the Sales and Use Tax Law, such as:

    • The normal books of account (books of account can include information stored on computers)
    • Documents of original entry (for example, bills, receipts, invoices, job orders, contracts, or other documents) supporting the entries in the books of account
    • All schedules or working papers used to prepare your tax returns

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  3. What should my records show?

    Your records must show:

    • Gross receipts from all sales or leases of tangible personal property--even sales or leases you may consider to be exempt from tax
    • All deductions claimed in filing returns
    • The total purchase price of all tangible personal property purchased for sale, consumption, or lease
  4. How long do I keep my business records?

    You must keep sales and use tax records for four years unless the Board gives written authorization for earlier destruction. This applies to all records that pertain to transactions involving sales or use tax liability.

    In addition, if your records are being audited by the Board, you should retain all records for the period being audited until the audit is completed (or-if you appeal the findings or file a claim for refund-until your case is resolved).

  5. Should I keep resale or exemption certificates that I have accepted?

    Yes. You need to keep the certificates to document claimed nontaxable sales. If you do not keep these records, you are subject to tax, interest, and penalty charges if you cannot otherwise prove a sale was not subject to tax.

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