Oregon Administrative Rules
Chapter 150 - DEPARTMENT OF REVENUE
Division 314 - INCOME TAXATION GENERALLY GENERAL PROVISIONS
Section 150-314-0265 - Model Recordkeeping and Retention
Universal Citation: OR Admin Rules 150-314-0265
Current through Register Vol. 63, No. 9, September 1, 2024
(1) Definitions. For purposes of this rule, 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 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.
(f) "Taxpayer" as used in
this rule means any natural person, estate, trust, or beneficiary whose income
is in whole or in part subject to the taxes administered by the department that
tie to provisions in ORS chapter 314.
(2) Recordkeeping Requirement - General:
(a) A taxpayer shall maintain all records
that are necessary to a determination of the correct tax liability under tax
laws of this state that are administered by the department that tie to
provisions in ORS chapter 314. All required records shall be made available on
request by the department or its authorized representatives as provided for in
ORS 314.425.
(b) If a taxpayer retains records required to
be retained under this rule in both machine-sensible and hard-copy formats, the
taxpayer shall make the records available to the department in machine-sensible
format upon request of the department.
(c) Nothing in this rule 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 taxpayer also has retained or has the capability to retain records on
electronic or other storage media in accordance with this rule. However, this
subsection shall not relieve the taxpayer of the obligation to comply with
subsection (2)(b) of this rule.
(3) Recordkeeping Requirements - Machine-Sensible Records:
(a) 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 department upon request. A taxpayer
has discretion to discard duplicated records and redundant information provided
its responsibilities under this rule 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 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:
(A) Where 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. 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 to interpret the coded
information.
(B) The taxpayer may
capture the information necessary to satisfy subsection (3)(b)(A) 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 suppliers. The
taxpayer decides to retain the invoice data from 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. 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 rule.
(d) Business Process
Information:
(A) Upon the request of the
department, 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.
(B) 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.
(C) The following specific
documentation is required for machine-sensible records retained pursuant to
this rule:
(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.
(4) Records Maintenance Requirements:
(a) The department 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 the labeling of 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.
(b) The taxpayer's
computer hardware or software shall accommodate the extraction and conversion
of retained machine-sensible records.
(5) Access to Machine-Sensible Records:
(a) The manner in which the department is
provided access to machine-sensible records as required in subsection (2)(b) of
this rule 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:
(A) The taxpayer may arrange to provide the
department 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
department including copies of files, on a magnetic medium that is agreed to by
the department.
(D) The taxpayer
and the department may agree on other means of providing access to the
machine-sensible records.
(6) Taxpayer Responsibility and Discretionary Authority:
(a) In conjunction with meeting the
requirements of section (3) of this rule, a taxpayer may create files solely
for the use of the department. For example, if a database management system is
used, it is consistent with this rule for the taxpayer to create and retain a
file that contains the transaction-level detail from the database management
system and that meets the requirements of section (3) of this rule. The
taxpayer should document the process that created the separate file to show the
relationship between that 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
rule.
(7) 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 rule 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:
(A) Documentation establishing the procedures
for converting the hard-copy documents to microfilm, microfiche or other
storage-only imaging system shall 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.
(B) Procedures shall 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 section (9) of this
rule.
(C) Upon request by the
department, a taxpayer shall provide facilities and equipment for reading,
locating, and reproducing any documents maintained on microfilm, microfiche or
other storage-only imaging system.
(D) When displayed on such equipment or
reproduced on paper, the documents shall 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 or numerals being recognizable as
words or complete numbers.
(E) All
data stored on microfilm, microfiche or other storage-only imaging systems
shall be maintained and arranged in a manner that permits the location of any
particular record.
(F) There is no
substantial evidence that the microfilm, microfiche or other storage-only
imaging system lacks authenticity or integrity.
(8) Effect on Hard-Copy Recordkeeping Requirements:
(a) Except as otherwise provided
in this section, the provisions of this rule do 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 rules. Hard-copy
records may be retained on a recordkeeping medium as provided in section (7) of
this rule.
(b) If hard-copy records
are not produced or received in the ordinary course of transacting business
(e.g., when the taxpayer uses 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 shall be retained 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 rule. Such details include those listed in subsection
(3)(b)-(A).
(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 from requesting hard-copy printouts in
lieu of retained machine-sensible records at the time of examination.
(9) Records Retention - Time Period - All records required to be retained under this rule shall be preserved pursuant to ORS 314.425 unless the department has provided in writing that the records are no longer required.
Statutory/Other Authority: ORS 305.100
Statutes/Other Implemented: ORS 314.425
Disclaimer: These regulations may not be the most recent version. Oregon may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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