§ 4901. Records.
18 CA ADC § 4901Barclays Official California Code of Regulations
Barclays California Code of Regulations
Title 18. Public Revenues
Division 2. California Department of Tax and Fee Administration-- Business Taxes (State Board of Equalization-- Business Taxes, See Ch. 6 and 9.9)
Chapter 9.9. California Department of Tax and Fee Administration and State Board of Equalization -- Special Taxes Administration -- Miscellaneous
18 CCR § 4901
§ 4901. Records.
(3) “Electronic cash register” -- a device that keeps a register or supporting documents through the means of an electronic device or computer system designed to record transaction data for the purpose of computing, compiling, or processing retail sales transaction data. This can include integrated point of sale systems.
(5) “Electronic record” -- a collection of related information in an electronic, machine-sensible format. Electronic records do not include hardcopy records that are created or recorded on paper or stored in or by a storage-only imaging system such as microfilm, microfiche, PDF files, or other media used in electronic imaging. Electronic records include records recorded and maintained by electronic cash registers.
(1) A taxpayer shall maintain and make available for examination on request by the Department or its authorized representative, all records necessary to determine the correct tax liability under the applicable tax laws and all records necessary for the proper completion of the required tax return or report. Such records include but are not limited to:
(A) Electronic records used to establish tax compliance shall contain sufficient source document (transaction-level) information so that the details underlying the electronic records can be identified and made available to the Department upon request. A taxpayer has discretion to discard duplicated records and redundant information provided the integrity of the audit trail is preserved and the responsibilities under this regulation are met.
(B) At the time of an examination, the retained records must be capable of being retrieved and converted to a standard magnetic record format which the Department has the technological capability to use, such as Extended Binary Coded Decimal Interchange Code (EBCDIC) or American Standard Code for Information Interchange (ASCII) flat file.
(C) Taxpayers are not required to construct electronic 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.
(A) Where a taxpayer uses electronic data interchange (EDI) 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:
Codes may be used to identify some or all of the data elements, provided the taxpayer maintains a method which allows the Department to interpret the coded information.
(B) The taxpayer may capture the information necessary to satisfy subdivision (c)(2)(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 EDI 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 capture information from the invoice pertaining to product description and vendor name (i.e., they contain only codes for that information), the taxpayer must also retain other records, such as its vendor master file and product code description lists, and make them available to the Department. In this example, the taxpayer need not retain its EDI transaction for tax purposes.
(3) Electronic Data Processing Systems Requirements. The requirements for an electronic data processing (EDP) 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.
(A) Upon 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.
(2) 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.
(1) In conjunction with meeting the requirements of subdivision (c), a taxpayer may create files solely for the use of the Department. 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 subdivision (c). The taxpayer should document the process that created the separate file to show the relationship between that file and the original records.
(1) Except as specifically provided, taxpayers are not relieved of the responsibility to retain hardcopy records that are created or received in the ordinary course of business as required by existing law and regulations. Hardcopy records may be retained on a record keeping medium as provided in subdivision (h).
(3) Hardcopy records generated at the time of a transaction using a credit or debit card must 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 regulation. Such details include those listed in subdivision (c)(2)(A).
(1) For purposes of storage and retention, taxpayers may convert hardcopy documents received or produced in the normal course of business and required to be retained under this regulation to storage-only imaging media such as microfilm, microfiche, PDF files, or other media used in electronic imaging and may discard the original hardcopy documents, provided the conditions of subdivision (h) 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.
(A) Documentation establishing the procedures for converting the hardcopy documents to the storage-only imaging system 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.
(D) 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 or numerals being recognizable as words or complete numbers.
For example, if a taxpayer has a point of sale system that overwrites data after a period of time less than four years, the taxpayer should transfer, maintain, and have available, all data that would have been overwritten or otherwise removed from the system for the required time periods indicated above.
(1) The Department has the authority to enter into or revoke a record retention limitation agreement with the taxpayer to modify or waive any of the specific requirements in this regulation. A taxpayer's request for an agreement must specify which records (if any) the taxpayer proposes not to retain and provide the reasons for not retaining such records, as well as, proposing any other terms of the requested agreement. The taxpayer shall remain subject to all requirements of this regulation that are not modified, waived, or superseded by a duly approved record retention limitation agreement.
(2) A taxpayer's record retention practices shall be subject to evaluation by the Department when a record retention limitation agreement exists. The evaluation may include a review of the taxpayer's relevant data processing and accounting systems with respect to EDP systems, including systems using EDI technology.
(C) Unless otherwise specified, an agreement shall not apply to accounting and tax systems added subsequent to the completion of the record evaluation. All electronic records produced by a subsequently added accounting or tax system shall be retained by the taxpayer in accordance with this regulation until a new evaluation is conducted by the Department.
(D) Unless otherwise specified, an agreement made under this subdivision shall not apply to any person, company, corporation, or organization that, subsequent to the taxpayer's signing of a record retention limitation agreement, acquires or is acquired by the taxpayer. All electronic records produced by the acquired or the acquiring person, company, corporation, or organization, shall be retained pursuant to this regulation.
(3) In addition to the record retention evaluation under subdivision (j)(2), the Department may conduct tests to establish the authenticity, readability, completeness, and integrity of the electronic records retained under a record retention limitation agreement. The state shall notify the taxpayer of the results of such tests. These tests may include the testing of EDI and other procedures and a review of the internal controls and security procedures associated with the creation and storage of the records.
Credits
Note: Authority cited: Sections 8251, 9251, 30451, 32451, 40171, 41128, 43501, 45851, 46601, 50152, 55301 and 60601, Revenue and Taxation Code; and Sections 15570.22, 15570.24 and 15570.40, Government Code. Reference: Sections 8301, 8302, 8303, 8304, 9253, 9254, 30453, 30454, 32551, 32453, 40172, 40173, 40174, 40175, 41056, 41073, 41129, 43502, 45852, 46602, 46603, 50153, 55302, 55363.5, 60604, 60605 and 60606, Revenue and Taxation Code.
History
1. New chapter 9.9 (sections 4901-4902) and section filed 4-28-2003; operative 5-28-2003 (Register 2003, No. 18).
2. Change without regulatory effect amending subsections (a)(1)(C) and (a)(1)(Q) and adopting subsections (a)(1)(R)-(S) filed 3-30-2010 pursuant to section 100, title 1, California Code of Regulations (Register 2010, No. 14).
3. Amendment of section and Note filed 6-27-2016; operative 10-1-2016 (Register 2016, No. 27).
4. Amendment of chapter heading filed 3-19-2018 as an emergency; operative 3-19-2018 (Register 2018, No. 12). Pursuant to Government Code section 15570.40, this action is a deemed emergency and exempt from OAL review. A Certificate of Compliance must be transmitted to OAL by 9-17-2018 or emergency language will be repealed by operation of law on the following day.
5. Amendment of chapter heading refiled 9-17-2018 as an emergency; operative 9-17-2018 (Register 2018, No. 38). Pursuant to Government Code section 15570.40, this action is a deemed emergency and exempt from OAL review. A Certificate of Compliance must be transmitted to OAL by 12-17-2018 or emergency language will be repealed by operation of law on the following day.
6. Amendment of chapter heading refiled 12-17-2018; operative 12-17-2018 (Register 2018, No. 51). Pursuant to Government Code section 15570.40, this action is a deemed emergency and exempt from OAL review. A Certificate of Compliance must be transmitted to OAL by 3-18-2019 or emergency language will be repealed by operation of law on the following day.
7. Reinstatement of section as it existed prior to 3-19-2018 emergency amendment by operation of Government Code section 11346.1(f) (Register 2019, No. 12).
8. Amendment of chapter heading filed 3-19-2019; operative 3-19-2019. Submitted to OAL for filing and printing only. Exempt from the APA pursuant to Government Code section 15570.40(b) (Register 2019, No. 12).
9. Change without regulatory effect amending section and Note filed 3-15-2023 pursuant to section 100, title 1, California Code of Regulations (Register 2023, No. 11).
This database is current through 5/10/24 Register 2024, No. 19.
Cal. Admin. Code tit. 18, § 4901, 18 CA ADC § 4901
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