Current through Rules and Regulations filed through March 20, 2024
(1)
Purpose. The purpose of
this regulation is to define the requirements imposed on taxpayers for the
maintenance and retention of books, records, and other sources of information
under O.C.G.A. §§
3-3-6, 48-7-2, 48-7-111, 48-8-52, 48-9-8, 48-9-9, 48-9-40, 48-11-5 and
48-11-11.
It is also the purpose of the regulation to address these requirements where
all or a part of the taxpayer's records are received, created, maintained or
generated through various computer, electronic and imaging processes and
systems.
(2)
Definitions.
For the purposes of this regulation, these terms shall be defined as
follows:
(a) "Database Management System"
means a software system that controls, relates, retrieves and provides
accessibility to data stored in a database.
(b) "Electronic data interchange" or "EDI
technology" means the computer-to-computer exchange of business transactions in
a standardized structured electronic format.
(c) "Hard copy" means any documents, records,
reports or other data printed on paper.
(d) "Machine-sensible record" means a
collection of related information in an electronic format. Machine-sensible
records do not include hard-copy records that are created or recorded on paper
or stored in or by an imaging system such as microfilm, microfiche or
storage-only imaging systems.
(e)
"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. It does not include any systems, or part of a system, that
manipulates or processes any information or data contained on the document in
any manner other than to re-produce the document in hard copy or as an optical
image.
(f) "Taxpayer" as used in
this regulation means every person as defined under O.C.G.A. §§
48-1-2(18)
and
48-1-2(25).
(3)
Record Keeping
Requirements: General.
(a) A taxpayer
shall maintain all records that are necessary to a determination of the correct
tax liability under O.C.G.A. Chapters 3- 3, 48-7, 48-8, and 48-9. All required
records must be made available on request by the Department of Revenue or its
authorized representatives as provided for in O.C.G.A. §§
48-7-2, 48-8-52, 48-9-8, 48-9-9, and
48-9-40.
Such records shall include but not necessarily be limited to: suitable records
of the sales and purchases taxable under O.C.G.A. Chapter 48-8 and other books
of account which are necessary to determine the amount of tax due, merchandise
purchased (including all bills of lading, invoices and purchase orders), a
record of all deductions and exemptions claimed in filing sales or use tax
returns including exemption and resale certificates, and a record of all
tangible personal property used or consumed in the conduct of the business;
suitable records under O.C.G.A. Chapter 48-7 for the purpose of computation of
the income tax including accurate records of all income records including but
not limited to invoices, bills of sale, bills of lading, exemptions, and other
papers related to all motor fuel received, sold, delivered, or used within this
state and all motor fuel exported from this state.
(b) If a taxpayer retains records required to
be retained under this regulation in both machine-sensible and hard-copy
formats, the taxpayer shall make the records available to the Department of
Revenue in machine-sensible format upon the request of the Department of
Revenue.
(c) Nothing in this
regulation shall be construed to prohibit a taxpayer from demonstrating tax
compliance with traditional hard-copy documents or reproductions thereof, in
whole or in part, whether or not such a taxpayer also has retained or has the
capability to retain records on 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 (3)(b) of this regulation.
(4)
Record Keeping
Requirements Machine-Sensible Records.
(a)
General Requirements.
1. Machine-sensible records used to establish
tax compliance shall contain sufficient detail information so that the details
underlying the machine-sensible records can be identified and made available to
the Department of Revenue upon request. A taxpayer has discretion to discard
duplicated records and redundant information provided its responsibilities
under this regulation are met.
2.
At the time of an examination, the retained records must be capable of being
retrieved and converted to a standard record format.
3. Taxpayers are not 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 is not required
to construct such a record for tax purposes.
(b)
Electronic Data Interchange
Requirements.
1. Where a taxpayer
uses electronic data interchange processes and technology, the level of record
detail, in combination with other records related to the transactions, must be
equivalent to that contained in an acceptable paper record. For example, the
retained records should contain such information as vendor name, invoice date,
product description, quantity purchased, price, amount of tax, indication of
tax status, shipping detail, etc. Codes may be used to identify some or all of
the data elements, provided that the taxpayer provides a method which allows
the Department of Revenue to interpret the coded information.
2. The taxpayer may capture the information
necessary to satisfy paragraph (4)(b)1. of this regulation at any level within
the accounting system and need not retain the original EDI transaction records
provided the audit trail, authenticity and integrity of the retained records
can be established. For example, a taxpayer using electronic data interchange
technology receives electronic invoices from its supplier. The taxpayer decides
to retain the invoice data form completed and verified EDI transactions in its
accounts payable system rather than to retain the EDI transactions themselves.
Since neither the EDI transaction nor the accounts payable system captures
information from the invoice pertaining to product description and vendor name
(i.e., they contain only codes for that information), the taxpayer also retains
other records, such as its vendor master file and product code description
lists and makes them available to the Department of Revenue. In this example,
the taxpayer need not retain its EDI transaction for tax purposes.
(c)
Electronic Data
Processing Systems Requirements. The requirements for an electronic data
processing accounting system should be similar to that of a manual accounting
system, in that an adequately designed accounting system should incorporate
methods and records that will satisfy the requirements of this
regulation.
(d)
Business
Process Information. 1. Upon the
request of the Department of Revenue, the taxpayer shall provide a description
of the business process that created the retained records. Such 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.
2. The taxpayer shall
be capable of demonstrating:
(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
unauthorized addition, alteration, or deletion of retained records.
3. The following specific
documentation is required for machine sensible records retained pursuant to
this regulation:
(i) record formats or
layouts;
(ii) field definitions
(including the meaning of all codes used to represent information);
(iii) file descriptions (e.g., data set
name); and
(iv) detailed charts of
accounts and account descriptions.
(5)
Records Maintenance Requirements.
(a) The Department of Revenue
recommends but does not require that taxpayers refer to the National Archives
and Record Administration's (NARA) standards for guidance on the maintenance
and storage of electronic records, such as labeling or records, the location
and security of the storage environment, the creation of back up copies, and
the use of periodic testing to confirm the continued integrity of the records
[the NARA standards may be found at 36 Code of Federal Regulations, Part 1234,
July 1, 1995, edition.]
(b) The
taxpayer's computer hardware or software shall accommodate the extraction and
conversion of retained machine-sensible records.
(6)
Access to Machine-Sensible
Records.
(a) The manner in which the
Department of Revenue is provided access to machine-sensible records as
required in paragraph (3)(b) of this regulation may be satisfied through a
variety of means that shall take into account a taxpayer's facts and
circumstances through consultation with the taxpayer.
(b) Such access will be provided in one or
more of the following manners:
1. The
taxpayer may arrange to provide the Department of Revenue with the hardware,
software and personnel resources to access the machine-sensible
records.
2. The taxpayer may
arrange for a third party to provide the hardware, software and personnel
necessary to access the machine sensible records.
3. The taxpayer may convert the
machine-sensible records to a standard record format specified by the
Department of Revenue, including copies of files, on a magnetic medium that is
agreed to by the Department of Revenue.
4. The taxpayer and the Department of Revenue
may agree on other means of providing access to the machine-sensible
records.
(7)
Taxpayer Responsibility and Discretionary Authority.
(a) In conjunction with meeting the
requirements of paragraph (4) of this regulation, a taxpayer may create files
solely for the use of the Department of Revenue. For example, if a data base
management system is used, it is consistent with this regulation for the
taxpayer to create and retain a file that contains the transaction level detail
from the data base management system and that meets the requirements of
paragraph (4) of this regulation. The taxpayer should document the process that
created the separate file to show the relationship between the file and the
original records.
(b) A taxpayer
may contract with a third party to provide custodial or management services of
the records. Such a contract shall not relieve the taxpayer of its
responsibilities under this regulation.
(8)
Alternative Storage Media.
(a) 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, provided the conditions of this section are met.
Documents which may be stored on these media include, but are not limited to
general books of account, journals, voucher registers, general and subsidiary
ledgers, and supporting records of details, such as sales invoices, purchase
invoices, exemption certificates, and credit memoranda.
(b) Microfilm, microfiche and other
storage-only imaging systems shall meet the following requirements:
1. Documentation establishing the procedures
for converting the hard-copy documents to microfilm, microfiche or other
storage-only imaging systems must be maintained and made available on request.
Such documentation shall, at a minimum, contain a sufficient description to
allow an original document to be followed through the conversion system as well
as internal procedures established for inspection and quality
assurance.
2. Procedures must be
established 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 paragraph (10) of this
regulation.
3. Upon request by the
Department of Revenue, a taxpayer must provide facilities and equipment for
reading, locating, and reproducing any documents maintained on microfilm,
microfiche or other storage-only imaging systems.
4. When displayed on such equipment or
reproduced on paper, the documents must exhibit a high degree of legibility and
readability. For this purpose, legibility is defined as 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 is defined as the
quality of a group of letters of numerals being recognizable as words or
complete numbers.
5. All data
stored on microfilm, microfiche or other storage-only imaging systems must be
maintained and arranged in a manner that permits the location of any particular
record.
6. There is no substantial
evidence that the microfilm, microfiche or other storage-only imaging system
lacks authenticity or integrity.
(9)
Effect on Hard-copy Record Keeping
Requirements.
(a) Except as otherwise
provided in this section, the provisions of this regulation do not relieve
taxpayers of the responsibilities 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 on a record keeping medium as
provided in paragraph (8) of this regulation.
(b) If hard-copy records are not produced or
received in the ordinary course of transacting business (e.g., when the
taxpayer used electronic data interchange technology), such hard-copy records
need not be created.
(c) Hard-copy
records generated at the time of a transaction using a credit or debit card
must be retained unless all details necessary to determine correct tax
liability relating to the transaction are subsequently received and retained by
the taxpayer in accordance with this regulation. Such details include those
listed in paragraph (4)(b)1. of this regulation.
(d) Computer printouts that are created for
validation, control, or other temporary purposes need not be
retained.
(e) Nothing in this
section shall prevent the Department of Revenue from requesting hard-copy
printouts in lieu of retained machine- sensible records at the time of
examination. In the event that extraordinary circumstances exist which prevent
the Department of Revenue from utilizing machine sensible records at the time
of examination, nothing in this section shall prevent the Department of Revenue
from requiring hard copy printouts in lieu of machine sensible
records.
(10)
Records Retention: Time Period. All records required to be retained
under this regulation shall be preserved pursuant to O.C.G.A. §§
3-3-6, 48-7-2, 48-7-111, 48-8-52, 48-9-8, 48-9-9, 48-9-40, 48-11-5 and
48-11-11unless the Department of Revenue has provided in writing that the records are
no longer required.
O.C.G.A. Secs.
3-3-6, 48-2-12, 48-7-2, 48-7-111, 48-8-52, 48-9-8, 48-9-9, 48-9-19, 48-9-40, 48-11-5 and
48-11-11.