Pennsylvania Code › Title 61 - REVENUE › Part I - Department of Revenue › Subpart B - General Fund Revenues › Article II - Sales and Use Tax › Chapter 34 - REGISTRATION, RECORDKEEPING AND RETURNS › Section 34.2 - Keeping of records

Current through Register Vol. 54, No. 28, July 13, 2024
(a)
General requirements.
The act provides that every sale of
					 tangible personal property or services thereon shall be presumed to be at
					 retail and to be subject to sales tax. Therefore, every person who sells or
					 uses personal property or services shall be required to keep the following
					 basic records:
(1) For purposes of
					 accountability for use tax, taxpayers shall be required to retain purchase
					 invoices, requisitions, documents and other records relating to their
					 acquisition of tangible personal property and services. The purchaser shall
					 maintain records showing that the tax was paid where the purchaser has paid the
					 tax to his vendor, and where the purchaser has not paid tax to his vendor but
					 has paid use tax directly to the Commonwealth. Where the purchaser has not paid
					 tax in the above cited instances, he shall create and maintain records showing
					 the reason he considered the purchase as nontaxable, and information concerning
					 the nature, use, price and dates of purchases and use of the property, from
					 which it can be ascertained by the Department, with reasonable facility,
					 whether or not use tax is due thereon and, if due, the amount of tax.
(2) As a minimum for practicable enforcement,
					 the act required the following sales tax records which are amenable to a
					 three-point audit:
(i) With respect to sales,
					 records shall be maintained for each store or other outlet showing the total
					 amount of taxable and nontaxable sales, that is, gross sales, made on each day
					 and during each tax reporting period. Total sales should also be divided as to
					 cash sales and credit sales.
(A) Sales tax
					 records shall be maintained from which it is possible to ascertain the vendor's
					 compliance with the taxing and exemption features of the act, that is, whether
					 sales made without collection of tax were in fact nontaxable. The records shall
					 describe items sold without tax, and show those sales which were made tax free
					 because the purchase price was less than the amount at which the statute begins
					 to impose tax. This is the first essential for determining the amount of tax
					 incurred in the vendor's business.
(B) The vendor shall obtain from purchaser
					 and also retain certificates of exemption with respect to sales of a taxable
					 character which are sold tax free on the claim that they are exempt because of
					 the nature of the purchaser's activity and the use for which they are
					 purchased. In such cases, the identification of items sold as well as the
					 purchaser is necessary because the use of property in many instances is clearly
					 determined by the identification. For example, stationery may not be validly
					 exempt under a certificate stating that it is to be used directly in the
					 production, rendition or delivery of a public utility service.
(ii) The second essential is that
					 sales tax records shall show the tax incurred on each taxable sale so that a
					 so-called effective rate may be determined. Under the bracket schedule
					 established by the TRC the rate of tax incurred varies according to the
					 purchase price of the sale. The overall effective rate of the vendor's tax
					 incurred cannot be determined unless there are reliable sales records showing
					 the taxable sales price of individual sales.
(iii) Apart from accountability of tax
					 incurred, records of the amount of tax actually collected by the vendor shall
					 be essential for the following reasons:
(A)
					 Since the vendor is a trustee with respect to the taxes he has collected, the
					 keeping of records which will clearly reflect his performance of his
					 responsibilities is basic to this fiduciary relationship. The TRC, in
					 recognition of this, requires that a vendor shall remit the amount of tax due,
					 incurred or the amount actually collected, whichever is greater.
(B) The burden which would be placed on
					 vendors whose businesses involve a large number of mixed sales if they were
					 required to maintain complete records of the tax incurred on every individual
					 sales transaction as described in this paragraph have long been recognized by
					 the Department. Therefore, vendors shall be permitted to keep records of tax
					 incurred on a sample basis under standards discussed in detail in subsection
					 (b).
(C) If a vendor, for his own
					 convenience, computes and reports his tax incurred on the basis of a formula
					 derived from part-time, sample or test check recordkeeping, complete records of
					 the amount of tax actually collected at each outlet together with a record of
					 sales at each outlet, provide a practical basis for comparison with the results
					 of the formula. This continuous check is useful both to the vendor and the tax
					 agency in gauging the reliability of the formula, and the tax consciousness of
					 store personnel.
(iv) A
					 vendor's duty to collect and remit tax on taxable sales, his liability for tax
					 due if he fails to collect properly, and his duty to keep records from which
					 liability for tax incurred and tax collected can be ascertained, are clearly
					 imposed in the TRC. Reference should be made to sections 208, 237(b) and 271 of
					 the TRC (72 P. S. §§
														7208,
					 7237(b) and
					 7271).
(3) The memoranda
					 or records required to be created at the time of sale may take the form of
					 sales slips, sales invoices, guest checks, tally sheets, itemized lists,
					 memoranda or other records provided they meet the requirements of this section
					 as to content. Thus, a copy of a cash register tape retained by the vendor may
					 meet the requirements of an auditable sales tax record if it bears sufficient
					 identification of the items sold and other required information.
(i) Within reasonable limits, items may be
					 described by a symbol if the symbol is representative of a class of merchandise
					 or services all of which constantly remains taxable or nontaxable. Thus, if a
					 vendor sells only nontaxable periodicals in his "Department P," a description
					 of such merchandise as "Dept P" is sufficient provided the vendor uses such
					 symbol consistently in all of his records to describe the same merchandise.
					 However, if a vendor sells several types of merchandise of both taxable and
					 nontaxable merchandise in a single department, his records shall identify
					 individually the types of merchandise which are nontaxable.
(ii) The following shall constitute an
					 example: JOHN DOE STOREMILLVILLE, PA.
Sales Slip
Jan. 15, 1968
To: Roe Ribbon Mill
1. 1 Coffee percolator
$16.80
2. 1 hacksaw
4.25
3. 1 pr. doorknobs
3.10
$24.15
(6 percent Sales Tax-$1.45)
4. 6 prs. cotton gloves
4.20
5. 2 bearings (loom) Manuf. Exemp. Cft.
8.50
$36.85
Sales Tax
1.45
$38.30
(A) It is
					 assumed for the purpose of this example that the Roe Ribbon Mill has furnished
					 the Doe Store a manufacturer's exemption certificate. Since this exemption
					 covers only items used directly in manufacturing, items 1 and 2 are taxable.
					 Since the exemption does not cover maintenance of realty, item 3 is taxable. No
					 tax is incurred on item 4 because clothing is exempt. No tax is incurred on
					 item 5 since it is covered by the manufacturer's exemption. Therefore, the
					 total taxable sale price is $24.15. On this price, the tax incurred is computed
					 as follows:
6 percent on full dollar amount (6
percent of $24.)
$1.44
6 percent on cents amount of
price under the "Bracket
System" (11¢ to 17¢
								incl.)
.01
TOTAL TAX INCURRED
_______
$1.45
(B) Notice how the sales slip in this
					 example, supported by the exemption certificate, permits an audit of the
					 vendor's performance in applying tax status rules to arrive at nontaxed items
					 and in computing the tax incurred on the taxable amount of the sale. Had the
					 vendor incorrectly determined the tax at less than $1.45, he would nevertheless
					 be liable for payment of the correct amount. If he had collected more than
					 $1.45 he would be liable to the Commonwealth for the amount collected unless he
					 showed that he had refunded the overcharge to the purchaser.