Sales and Use Tax Compliance- Scanning Documents

by | Oct 8, 2022 | Audits, General Business, Stephanie's Wisdom | 0 comments

This tip is about sales tax compliance and document retention. Specifically, making sure you have a plan in place when it comes to scanning your documents. Here are some things to remember when scanning documents and keeping electronic copies of invoices.

Key Takeaways:

1. The documents must be legible. If you can’t read the invoice, the auditor can’t either. Make sure that the scanned copy does not have a post-it or bent page that makes the document illegible. 

2. Double check that you have all invoices relating to fixed assets and other big ticket purchases. Although every invoice is important, I suggest emphasizing your large dollar purchases. Things like equipment, software, hardware, etc. The invoices should be retained and periodically reviewed for legibility.

3. Confirm you have the document showing the sales tax. When making credit card purchases, don’t think that the receipt is unimportant. You want to have a copy of the receipt with the sales tax information. Auditors review expense statements. If they do not see the separately stated sales tax on the invoice, it is more than likely they assess tax on that transaction. And credit card statements do not always separately state the sales tax charged. Keep the actual receipt or invoice that does!

4. Archive emails, etc. of employees that make internet purchases. If an employee makes an online purchase, the vendor always sends confirmation. That confirmation normally has all the sales tax information. Archiving employee email is another way to ensure that you can retrieve invoices relating to online purchases. You may have to pull that information in an audit context.

5. Make a document retention plan and be consistent. Source documents are the life blood of an audit. Purchase invoices, sales invoices, contracts, in addition to accounting records are essential. Make sure to obtain and retain these documents for at least the applicable statute of limitations in the jurisdiction where you conduct business. For sales and use tax purposes, that is usually 3-4 years.

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