WAC 254

"Gross income of the business."

Sales in own name--Sales as agent

Records to be preserved -- Examination -- Estoppel to question assessment -- Unified business identifier account number records.

Record keeping.Updated02/06/07 effective 03/09/07.

Record keeping requirements

SUITABLE RECORDS - TIMBER HARVESTERS - ETA Cancelled 2/15/2001

Cash Basis Reporting Method

RECORD -- DUTY TO RESERVE. A taxpayer objecting to the Department's measure of or factual basis for use tax carries the burden of proving its case with written evidence.

RECORDS -- DOCUMENTATION -- RETENTION -- BARRED FROM QUESTIONING ASSESSMENT. Taxpayers are required to keep records that are necessary to determine their tax liability. Taxpayers who fail to keep andpresent such records to the Department ofRevenue will bar the taxpayer from questioning the correctness of the assessment.

RECORD KEEPING -- CONSEQUENCES OF FAILURE TO KEEP RECORDS. Any person who fails to comply with the requirements of RCW 82.32.070 or of WAC 458-20-254 shall be forever barred from questioning, inany court action or proceedings, the correctness of any assessment of taxes made by the department based upon any period for which such books, records, and invoices have not been so kept and preserved.

The scope of an audit is not limited to the records initially provided by a taxpayer. Rather, the Department is given broad authority to review a taxpayer's books and records in order to verify the accuracy of a return. Except for unregistered taxpayers or upon a showing of fraud or misrepresentation, the period of an assessment is limited to four years after the close of the tax year.

B&O TAX -- BARTER -- BROADCASTERS -- VALUATION. In determining the value of bartered advertising time for purposes of assessing B&O tax, the Department is entitled to rely on the value a broadcast station assigns to its advertising time under what it calls a "barter account".

TEST PERIODS.RCW 82.32.070 requires the taxpayer to keep and preserve suitable records so that its tax liability may be correctly determined.Failure to comply with this requirement forever bars the taxpayer from questioning the correctness of any assessment of taxes based upon the period for which the records have not been suitably kept.

B&O TAX -- SALES TAX -- USE TAX -- RECORD-KEEPING REQUIREMENTS.A person doing business in Washington is required to maintain records adequate to establish his or her state excise tax liability.One who fails to do so may not successfully object to an ensuing tax assessment.

B&O TAX -- SALE -- VALUE PROCEEDING OR ACCRUING -- CONSIDERATION -- BARTER.The transfer of goods for valuable services constitutes a sale of the goods measured by the value of the services.

RECORD KEEPING.Failure to keep adequate records prevents taxpayer from questioning Audit estimate of taxpayer’s income where no additional evidence provided on appeal contradicts the estimate.

B&O TAX – SALES OF GOODS VS. COMMISSION INCOME – AGENT – IMPORTER.To determine whether an importer takes title to goods it purchases and sells as the owner or acts as an agent receiving commission income, documents of sale to the U.S. customers offer the best evidence.Actual payment for the goods by the customers indicate exempt purchases from the owner, while commission payments for the services of an agent would be taxable.Letters of credit conditioned upon providing title indicate the party required to provide title has title.

B&O TAX – SALES OF GOODS VS. COMMISSION INCOME – AGENT – IMPORTER.The commissions paid customers to an agent are taxed under the service and other activities classification.Because title to the goods did not flow to or through the agent, the income received by the agent was not for goods, but was commission income taxable under the service and other activities classification.Invoices, contracts, and payment records are evidence of the nature of the transaction.

RECORDS TO BE PRESERVED.Every Taxpayer is required to keep adequate records to establish tax liability.Failure to provide such records renders the taxpayer unable to question the assessment.

USE TAX – PUBLIC ROAD CONSTRUCTION vs. CUSTOM CONSTRUCTION – DUTY TO KEEP AND PRESERVE RECORDS.Whether a contractor/taxpayer who performed work on road projects was engaged in custom construction or in “public road construction” depended on whether the road projects were done on state-owned land or on land owned by a city, county, or other political subdivision of the state or the federal government.The taxpayer failed to keep and preserve records to support his claim that the road projects were custom construction.

SALES TAX -- AUDITS – TEST PERIODS – REASONABLE RESULTS.The use of test periods is an appropriate audit procedure if proper consideration is given to factors which could lead to other than reasonable results.Test period found acceptable where taxpayer purchases were used to project taxable sales and where an adjustment was made for the fact that taxable items sold more slowly than exempt items at a grocery store.

WHOLESALING B&O TAX – ACCOMMODATION SALE: AUTOMOBILE DEALER.Failure of an initiating automobile dealer of an accommodation sale to meet the requirement of keeping in its records a bona fide existing order of a customer prevents the dealer/taxpayer from deducting wholesaling B&O tax for that sale from its gross income.

EXCISE TAXES – CREDITING OR COMPENSATING TAXPAYER FOR COSTS INCURRED.The Department cannot grant a credit, or otherwise compensate, a taxpayer for out-of-pocket expenses the taxpayer incurs in connection with a Department examination of the taxpayer’s books and records, or in connection with appeals within the Department.

RCW 82.04.470, RCW 82.08.020, RCW 82.08.050, RCW 82.32.070:RETAIL SALES TAX – SELLER’S LIABILITY FOR – FAILURE TO TAKE RESALE CERTIFICATES – RECORDKEEPING REQUIREMENTS.A seller is liable for retail sales tax with respect to sales for which no resale certificate has been provided.The burden of maintaining proper records rests with the taxpayer.

RETAIL SALES TAX – RETAILING B&O TAX – RECORDKEEPING – FAILURE TO KEEP RECORDS.A contractor that fails to keep or provide records cannot challenge an assessment that was estimated from the few invoices and contract proposals that were acquired by the Department, even if one or more of the contract proposals may not have resulted in income to the taxpayer.

RETAIL SALES TAX – NONRESIDENT EXEMPTION – RECORDS.Taxpayers must maintain records required under RCW 82.08.0273 for each nontaxable sale to nonresidents to qualify for that statutory exemption.

TAX PAID AT SOURCE – RECORDS – FAILURE TO MAINTAIN.A person who did not maintain invoices separately stating retail sales tax was not entitled to a presumption that retail sales tax was paid on taxable purchases, even though the person did maintain credit card receipts showing the total amounts paid, which ended in uneven cents suggesting the that total price included retail sales tax.

B&O TAX – TEMPORARY LABOR—TAX CLASSIFICATION – LACK OF RECORDS – PRESUMPTION. A residential housing contractor was correctly assessed deferred retail sales tax on all the charges it paid to TSCs for the use of laborers when no records documented the nature of work they performed because the Department is entitled to a presumption, under RCW 82.32.070, that temporary labor performed for a contractor was related to the contractor’s main business activity – the building of homes.

RULE 254; RCW 82.32.070: RETAIL SALES TAX – DOCUMENTATION SHOWING PAYMENT OF RETAIL SALES TAX. A purchaser of retail construction services is not subject to retail sales tax when it can show through invoices and other documentation that the contractor collected retail sales tax that it remitted to the Department of Revenue.

RULE 254; RCW 82.32.070: RECORDS – SUBSTANTIATION – CASH SALES. Rule 254(3) requires taxpayers to prepare and preserve original source documents or such other records as may be necessary to substantiate gross receipts and sales.

RULE 254; RCW 82.32.070, RCW 82.32.100: RECORDS – GROSS INCOME – BANK DEPOSITS. Where the taxpayer failed to produce records to explain the discrepancy between the deposits in the bank account and the amounts reported on the excise tax returns, Audit was justified in using the bank deposits to estimate gross income.

RCW 82.32.070; RCW 82.32.100: RECORDKEEPING – FAILURE TO KEEP RECORDS – ESTIMATE OF TAX LIABILITY. If a taxpayer fails to maintain and provide adequate records to determine the taxpayer’s excise tax liability, the Department is authorized to use the records available to arrive at its best estimate of the taxpayer’s tax liability.

RULE 244, RULE 254; RCW 82.32.070:; RETAIL SALES TAX – RETAILING B&O TAX – RECORDKEEPING – FAILURE TO KEEP RECORDS. All sales of food and food ingredients at an establishment will be treated as taxable unless the seller separately accounts for sales of exempt and nonexempt food and food ingredients. Rule 244(6). The Department is authorized to estimate a grocery store owner’s retail sales tax liability where the taxpayer failed to keep or provide reliable and complete records detailing taxable and nontaxable sales.

RULE 254(5); RCW 82.32.070(1): TAXPAYER’S RECORDS OPEN FOR EXAMINATION BY THE DEPARTMENT – THE DEPARTMENT IS REQUIRED TO ASSESS DELINQUENT TAXES FOLLOWING A REVIEW OF TAXPAYER’S BOOKS AND RECORDS. The alleged administrative burden placed upon Taxpayer in showing the Department its books and records during the course of an audit is not grounds for canceling the resulting assessment. Taxpayer’s books and records are open for examination by the Department any time.

RULE 254; RCW 82.32.070: RECORDS – RETAIL SALES TAX – RECORDKEEPING. A taxpayer must maintain and provide adequate records to demonstrate that it is entitled to an adjustment of a tax assessment.

RULE 254; RCW 82.32.070, RCW 82.32.100: BUSINESS AND OCCUPATION TAX – RECORDS RETENTION – ESTIMATE OF TAX – BANK DEPOSITS. Taxpayer did not provide the Department with records sufficient to determine whether some deposits into Taxpayer’s business bank account originated from nontaxable sources. Without adequate records for review, the Department concluded the deposits represented taxable income.

RULE 254; RCW 82.08.0273, RCW 82.32.070: RETAIL SALES TAX – NONRESIDENT EXEMPTION – RECORDS. Taxpayers must maintain records required under RCW 82.08.0273 for each nontaxable sale to nonresidents to qualify for that statutory exemption.

RULE 254; RCW 82.32.070, RCW 82.32.100: RECORDS – MEASURE OF SALES – BANK DEPOSITS. Where the seller failed to provide original source documents or records showing that the measure of sales as determined by bank deposits was incorrect, Audit was justified in using bank deposits to determine the measure of taxes.

RULE 254; RCW 82.32.070: RECORDS – SUBSTANTIATION. Where a seller received commission on sale completed by another party and is identified those invoices, the fact that those invoices itemize sales tax is independently insufficient to establish that the other party actually collected and remitted retail sales tax.

RULE 254; RCW 82.32.070: RECORDS – SUBSTANTIATION – COMMISSION INCOME – BEST EVIDENCE. Rule 254(3) requires taxpayers to prepare and preserve original source documents or such other records as may be necessary to substantiate gross receipts. Where a business makes retail sales and also has commission income, reliance on amounts reported on Federal Form 1099s as best evidence of commission income received is appropriate absent other source documents to substantiate the nature of contested income.

RCW 82.32.070; RULE 254 – RECORDS – DUTY TO MAINTAIN. A taxpayer must prepare, preserve, and provide records to support a claim for an adjustment to an assessment.

RULE 254; RCW 82.32.070 RETAILING B&O TAX – RECORDKEEPING. Where the business records provided show an extremely low volume of cash sales, which are significantly below industry norms for the Taxpayer’s type of business, this is sufficient evidence for the Audit Division to conclude that the available business records are not suitable to establish the tax due for the period under audit.

RULE 254; RCW 82.32.100; RETAIL SALES TAX – RETAILING B&O TAX – RECORDKEEPING – REASONABLE ESTIMATES. An industry study on customer payment practices is a reasonable and acceptable source of facts and information to establish an estimated percentage of cash sales under RCW 82.32.100(1), where the Taxpayers records are not suitable.

RULE 254; RCW 82.32.070; RCW 82.32.100: RECORDS TO BE PRESERVED – EXAMINATION. The Department is directed to estimate the assessment in such a manner it deems best when taxpayers do not keep and preserve suitable records.

RULE 254; RCW 82.32.070: RECORDS – RETAIL SALES TAX - RECORDKEEPING. Taxpayer must maintain and provide adequate records to demonstrate that he is entitled to an adjustment of a tax assessment.

RULE 254; RCW 82.32.070; RECORDKEEPING; RECORDS SUFFICIENT TO SUPPORT ADJUSTMENT. Upon converting from cash to accrual accounting, invoices in accounts receivable become subject to tax. Tax was properly assessed on outstanding invoices in accounts receivable on the date of the conversion and a general assertion that tax was remitted on a number of invoices is insufficient to support adjustment where the taxpayer can not substantiate that tax was actually remitted for the invoices at issue.

RULE 254; RCW 82.32.070; RCW 82.32.100: SUBSTANTIATION – GIFTS – BANK DEPOSITS. When a taxpayer fails to make records available for examination, the Audit Division is entitled to estimate a taxpayer’s gross income through the use of bank deposits. When a taxpayer claims the discrepancy between the amounts reported on its excise tax returns and the amounts deposited with its bank was due to gifts from family members, the burden is on the taxpayer to provide records substantiating which deposits were made as gifts.

RULE 254; RCW 82.32.070: RECORDS - SUBSTANTIATION - BEST EVIDENCE. Rule 254(3) requires taxpayers to prepare and preserve original source documents or such other records as may be necessary to substantiate gross receipts. Where a taxpayer did not provide requested business records to substantiate construction income, county construction permit information was reasonably relied upon to establish value of construction projects at issue.

RCW 82.08.0273; ETA 3054.2011: RETAIL SALES TAX – NONRESIDENT EXEMPTION – RECORDS. Taxpayers must maintain records required under RCW 82.08.0273 for each nontaxable sale to nonresidents to qualify for the statutory exemption.

RCW 82.32.100; 22 WTD 174 – AUDIT – BLOCK SAMPLE - DISAGREEMENT: Where a taxpayer disagrees with the result of a block sample, the only remedy on appeal is a remand for actual review of all records, and, should a taxpayer fail to provide sufficient records for actual review, the assessment based on the block sample shall be sustained pursuant to RCW 82.32.100.

RULE 254; RCW 82.32.100: RETAIL SALES TAX – RETAILING B&O TAX – RECORDKEEPING – ESTIMATES. Where Taxpayers failed to make available the required records, the Department issued reasonable estimated assessments, and Taxpayers provided no records to support an adjustment, the assessments are sustained.

RCW 82.08.0273: RETAIL SALES TAX – NONRESIDENT EXEMPTION – ADEQUACY OF RECORDS. A retailer must maintain records as described in RCW 82.08.0273 in order to qualify for the statutory exemption from collecting retail sales tax on the sale of goods.

RULE 254; RCW 82.04.470, RCW 82.32.100: B&O TAX – USE TAX – RESALE CERTIFICATES – RESELLER PERMITS – BURDEN OF PROVING A WHOLESALE SALE IS ON THE SELLER. The burden of proving a sale is at wholesale lies with the seller. Moreover, the burden is on the taxpayer to provide documents and other evidence that a tax assessment is incorrect.

RDW 82.32.145: LIMITED LIABILITY BUSINESS ENTITY – INTRA-COMPANY CONFLICTS DEPARTMENT’S DUTY TO OBTAIN RECORDS – TFAA – DEFENSE. Because there is no authority in The Revenue Act or elsewhere in Washington law authorizing the Department to intervene in intra-company conflicts between business associates in order to obtain records from one corporate officer for the benefit of another corporate officer, the Department’s not doing so is not a defense from liability under a TFAA.

RULE 254; RCW 82.32.070: RETAIL SALES TAX – RECORDKEEPING. Taxpayers are required to maintain adequate records to determine their tax liability. The Department may rely on a taxpayer’s own records to determine tax liability. If a taxpayer claims that its own records are erroneous, that taxpayer has the burden of proving such through adequate evidence.

RULE 254; RCW 82.32.070: RECORDS – RETAIL SALES TAX - RECORDKEEPING. Taxpayer must maintain and provide adequate records to demonstrate that he is entitled to an adjustment of a tax assessment.

DUTY TO MAINTAIN RECORDS. A Washington taxpayer must maintain business records for five years past.

DUTY TO MAINTAIN RECORDS. A Washingtontaxpayer must maintain business records for five years past.

AUDIT -- EXAMINATION OF RECORDS -- REFUSAL TO ALLOW. A taxpayer who provides its own information to the Department and declines to allow the Department to make its own examination cannot be heard to deny the tax liabilities from such information.

RECORDS -- DOCUMENTATION -- RETENTION -- BARRED FROM QUESTIONING ASSESSMENT. Persons liable for assessment of tax must keep suitable records. Failure to do so will bar the taxpayer from questioning the correctness of any assessment.

TAX LIABILITY -- DUTY TO KEEP AND PRESERVE RECORDS -- FAILURE TO PRODUCE DOCUMENTATION. Persons engaged in business are required to keep adequate records or are estopped to question a Department assessment of tax during an audit or a later proceeding. Where taxpayer produces no daily sales records of operations or records of sales from street fairs in which the business participated, the auditor's assessments based on visual observations and conversations with taxpayer's landlords and fair organizers must be upheld.

TAX LIABILITY -- DUTY TO KEEP AND PRESERVE RECORDS -- FAILURE TO PRODUCE DOCUMENTATION. Persons engaged in business are required to keep and produce adequate records for examination during an audit. Taxpayer's busy schedule during the audit does not relieve it of its duty to produce proof of taxes collected or paid. Should accurate records be supplied within the statutory period allowed for refunds or adjustments, an adjustment can be made.THIS DETERMINATION HAS BEEN OVERRULED OR MODIFIED IN WHOLE OR PART BY DET.NO. 94-057, 16 WTD 160 (1996).

TAX LIABILITY -- DUTY TO KEEP AND PRESERVE RECORDS -- FAILURE TO PRODUCE DOCUMENTATION. Persons engaged in business are required to keep and produce adequate records for examination during an audit.Should accurate records be supplied within the statutory period allowed for refunds or adjustments, an adjustment can be made.

RECORD KEEPING REQUIREMENTS -- MICROFILM -- DESTRUCTION OF ORIGINAL RECORDS. Original records can be destroyed if reproduced on microfilm and stored pursuant to the requirements stated herein (similar to IRS Revenue Procedure 81-46).

RECORDS. Taxpayers are required to keep records that are necessary to determine their tax liability. Taxpayers who fail to keep and present such records to the Department of Revenue cannot question taxes assessed in the absence of such records.

SALES/USE TAX -- RECORDS -- DOCUMENTATION. A taxpayer who fails to keep documentary evidence that it paid sales tax on the purchase of consumable and capital items may not successfully challenge an assessment which asserts deferred sales or use tax on those purchases.

RECORDS AVAILABLE FOR EXAMINATION. A taxpayer is required to make relevant records available to the auditor. Failure to do so may limit appeal.