Chapter 03. Record-Keeping Requirements for Records Created by Computer and Electronic Systems

“Electronic data interchange” or “EDI technology” means the computer-to-computer exchange of business transactions in a standardized structured electronic format.

“Hard copy” means any documents, records, reports, or other data printed on paper.

Machine-Sensible Record.

Storage-Only Imaging System.

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 Comptroller.

At the time of an examination, the retained machine-sensible records shall be capable of being retrieved and converted to a standard record format.

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 that record for tax purposes.

If 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 shall contain such information as vendor name, invoice date, product description, quantity purchased, price, amount of tax, indication of tax status, and shipping detail. Codes may be used to identify some or all of the data elements, if the taxpayer provides a method which allows the Comptroller to interpret the coded information.

The taxpayer may capture the information necessary to satisfy §B(1) of this regulation at any level within the accounting system and need not retain the original electronic data interchange transaction records if the audit trail, authenticity, and integrity of the retained records can be established.

Upon the request of the Comptroller, the taxpayer shall provide a description of the business process that created the retained records. The 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.

The taxpayer shall be capable of demonstrating the:

The following specific documentation is required for machine-sensible records retained pursuant to this regulation:

Convert hard-copy documents, received or produced in the normal course of business and required to be retained, to microfilm, microfiche, or other storage-only imaging systems; and

After a 3-month period, discard the original hard-copy documents, if the conditions of §B of this regulation are met.

Microfilm, microfiche, and other storage-only imaging systems shall meet the requirements of this regulation.

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. The 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.

A taxpayer shall establish procedures 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.

A taxpayer shall provide adequate facilities and equipment for reading, locating, and reproducing any documents maintained on microfilm, microfiche, or other storage-only imaging system so that records may be reviewed in a prompt and efficient manner.

When displayed on storage-only imaging 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.

All data stored on microfilm, microfiche, or other storage-only imaging systems shall be maintained and arranged in a manner that permits the prompt and efficient location of a particular record.