(a) An automatic data processing (ADP) tax
accounting system may be used to provide the records required to verify tax
liability. All ADP systems used for this purpose shall include a method of
producing legible and readable records to verify tax liability, reporting, and
payment. The following requirements apply to any taxpayer maintaining records
on an ADP system:
(1) The ADP system shall be
able to trace any transaction back to the original source or forward to a final
total. If detailed printouts are not made of transactions at the time they are
processed, the system shall have the ability to reconstruct these transactions.
The system shall be made available upon request to the department for
inspection and testing.
(2) A
general ledger, with source references, shall be prepared to coincide with
financial reports for tax reporting periods. Where subsidiary ledgers are used
to support the general ledger accounts, the subsidiary ledgers also shall be
prepared.
(3) The audit trail shall
be designed so that the details underlying the summary accounting data may be
identified and made available to the department upon request. The system shall
be designed so that supporting documents, such as sales invoices, purchase
invoices, and credit memoranda, are readily available.
(4) A description of the ADP portion of the
accounting system shall be made available to the department upon request. The
statements and illustrations as to the scope of operations shall be
sufficiently detailed to indicate:
(A) The
application being performed;
(B)
The procedures employed in each application, which may be supported by flow
charts, block diagrams, or other reasonable description of the input or output
procedures; and
(C) The controls
used to ensure accurate and reliable processing.
Changes in the ADP system, together with their effective
dates, shall be noted.
(5) Adequate record retention facilities
shall be used for storing tax information, printouts, and all supporting
documents required by law.
(b) Compliance with standards promulgated by
the Internal Revenue Service for ADP systems to be in compliance with section
6001 (with respect to records required to be kept by every person subject to
any federal tax) of the Internal Revenue Code of 1986, as amended (such as Rev.
Proc. 91-59, 1991-2 C.B. 841) shall be considered sufficient to comply with
this section.
