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Since UCLA holds a California Sales and Use Tax
Permit, we are required to maintain business records to substantiate that
we have paid the proper amount of California sales and use tax on both our
sales and purchase transactions. In
order to verify that we have paid the proper amount of sales and use tax,
the State Board of Equalization
audits UCLA’s books and records every
three years. As a result, excellent record keeping practices are essential
in protecting the University and its departments from assessments of
additional tax, interest and penalties for sales and use tax
underpayments. The following is a brief discussion of the sales and use
tax record keeping requirements for UCLA departments that sell tangible
personal property to purchasers other than UCLA departments.
UCLA is required to charge and remit sales tax on
its sales of tangible personal property in California, unless the sales or
items sold are specifically exempted from California sales tax under
prevailing law.
Some of the most common examples of exempt items or sales
are as follows:
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Sales of items that are themselves exempt from
California sales tax under a “specified California Revenue &
Taxation Code Section or regulation,” such as most prescription
medicines which are exempt under California Regulation 1591.
-
Items
purchased by UCLA for resale and supported by the issuance of a “valid
resale certificate,” such as books purchased by UCLA to be resold to
students. See “Note” below.
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Sales to out-of-state customers supported by a
“shipping or mail receipt,” such as an out-of-state resident’s mail
order for a book that specifies delivery to a point outside California.
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Sales to purchasers who intend to resell the items
purchased and issue UCLA a valid resale certificate prior to or at the
time of sale, such as another University purchasing a book from one of our
departments to resell to their students.
For information on the taxability of a particular
item or sale and what constitutes a “valid resale certificate,” please
consult the UC Sales and Use Tax Manual at http://www.ucop.edu/ucophome/policies/sutm/welcome.html.
Note: Departments that sell items of
tangible personal property to purchasers other than UCLA departments, may
purchase items of tangible personal property that they intend to resell
tax-free if a valid resale certificate is issued by Purchasing (via a
purchase order) or by Tax Services. When purchases are made under a resale
certificate, departments must be able to substantiate through their
departmental books and records that the items purchased were in fact later
resold or continue to remain in resale inventory. For the items resold,
departments must maintain records to show that they collected and remitted
the proper amount of tax on their sales transactions. If a department
purchases items on a resale certificate and later uses them for their own
use, use tax should be paid on such items by preparing a financial journal
crediting UCLA’s use tax account and debiting the departmental operating
account for the proper amount of tax.
WHAT
SHOULD MY RECORDS SHOW?
Records should generally show:
· Items UCLA purchased for resale - The quantity,
description, purchase date and purchase price of all items purchased
tax-free with a valid resale certificate and the disposition of such items
(i.e., whether they were sold, remain in resale inventory or were consumed
by the department). A copy of the resale certificate issued should also be
maintained.
· UCLA sales of tangible personal property - The name
and address of the purchaser, quantity, description, sales price, tax
collected and remitted, place of sale, date of sale, and ship to address
(if applicable) of the purchaser, for all sales of taxable tangible
personal property. If tax was not collected, an explanation and
documentation supporting why the sale was not subject to tax must be
provided, e.g., a valid resale certificate if the purchaser is buying the
items with the intention of reselling them.
· Some types of sales activities, such as a cafeteria, will
not have this level of detail and may substantiate their sales by original
cash register tapes. If your department is unable to provide the records
identified in the second bullet above, please consult Tax Services
regarding your particular sales activity and the acceptable types of
documentation to maintain.
WHAT RECORDS
SHOULD I KEEP?
· Normal books of account that show your
department’s sales income and
expenses
and
resale inventory balances.
·
Documents of original entry such as sales and purchase invoices,
purchase orders,
contracts,
bills of lading or other shipping documents,
resale certificates,
departmental deposit
records, and any other receipts
or documentation substantiating the above
items.
DO MY RECORDS HAVE TO
BE IN ANY PARTICULAR FORM?
· Sales and use tax records can be in paper or electronic form
or kept on storage media such as removable disks or film. If you keep
electronic records, you need to make sure that you will be able to print
them if requested.
HOW LONG SHOULD I KEEP MY
SALES TAX RELATED RECORDS?
·
Sales and use tax records should generally be maintained for
7 years from the date of the purchase or sale transaction. Records should
be retained longer if there is an existing dispute or other action, such
as a refund claim or audit, underway regarding the amount of tax owed, in
which case, you should maintain the related records until such dispute or
action is resolved. Before tax-related records are destroyed at the
7-year
mark, please consult with Records Management and Tax Services to make sure
there are no pending audits in connection with the periods to be
destroyed.
WHAT HAPPENS IF MY
DEPARTMENT IS UNABLE TO PRODUCE THE REQUIRED RECORDS WHEN REQUESTED?
·
Since departments engaged in sales activities have the
responsibility for substantiating that they collected and remitted the
correct amount of sales and use tax in connection with their activities,
any tax assessments resulting from the department’s lack of or
inadequacy of records relating to their activities will be the
department’s financial responsibility.
WHO CAN I CONSULT FOR MORE
INFORMATION ABOUT PROPER SALES AND USE TAX RECORD RETENTION?
·
Records Management
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