Tax Type
Retail Sales and Use Tax
Description
Record-keeping for corporate purchasing card transactions
Topic
Returns/Payments/Records
Date Issued
08-11-1999
August 11, 1999
Dear ****
This will reply to your letter in which you request a ruling regarding the record keeping requirements, for sales and use tax purposes, for users of corporate credit cards. I apologize for the delay in our response.
FACTS
n an effort to cut cost and reduce paper documentation, many businesses are implementing corporate purchasing card programs. These programs result in improved efficiency and reduction in costs of the procurement functions. In order to provide their clients with the proper information, ***** (the "Taxpayer'), is requesting a ruling as to Virginia record keeping requirements as they relate to various scenarios, all of which will be addressed separately below.
RULING
Code of Virginia Sec. 58.1-633 statutorily provides for dealer record keeping requirements and provides for the following:
Keeping the above in mind, I will address each scenario presented in your letter separately below.
I. Adequacy of Level II Data for Documenting Tax Paid
Level II provides enhanced record keeping data for corporate purchasing card transactions. When a corporate purchasing card is used with a Level II capable vendor, the vendor is prompted at the point of sale to input additional information regarding the transaction. Level II requires the vendor to input the amount of tax paid on the total transaction. Level II does not separately state each purchase for the total transaction.
Question
Does Level II tax data on the cardholder's statement provide adequate sales or use tax documentation in lieu of an itemized receipt? If not, what additional documentation will be required?
Answer
The Level II tax data is sufficient provided there are no exempt sales or purchases included in the total transaction. If exempt sales are included in the total transaction, the vendor and the purchaser must maintain internal itemized records to substantiate all exempt sales and purchases included in the total transaction.
II. Calculation of the Use Tax Accrual Based on the Best Practices Tax Model
The Best Practices Tax Model is a system for identifying use tax accruals on corporate purchasing card transactions. The system automatically eliminates transactions which have a definitive tax status, i.e., transactions between vendors and purchasers located in the same state, identifiable exempt purchases/sales, interstate commerce sales where the vendor does not have nexus in the purchasers state, etc. The model categorizes all transactions as either i) exempt, ii) taxed by a dealer, or iii) use tax due. All "use tax due' transactions will be totaled and the use tax accrual amount will be calculated for the Purchasers convenience.
Question
Does the Best Practices Tax Model meet the record keeping and reporting requirements for sales and use tax in Virginia?
Answer
The Best Practice Tax Model provides to a purchaser using a corporate purchasing card the total of all unidentifiable transactions for which the tax status cannot be determined. This model also calculates the use tax due on these transactions based on the location of the purchaser. The Best Practices Tax Model meets the record keeping and reporting requirements for sales and use tax in Virginia. However, sellers and purchasers must maintain adequate internal records to substantiate all nontaxed purchases and sales.
III. Program for Auditing InfoSpan-Calculated Use Tax Accrual
The InfoSpan software program is a program designed to help manage the corporate purchasing card program for audit purposes. This program filters out various taxable and exempt purchasing card transactions to determine whether or not the tax application is being properly applied. This includes Level II transactions, use tax accruals, out-of-state vendors, exempt sales, transactions associated with various taxable or exempt account numbers, manually reviewed high-dollar transactions, etc.
Question
Does the InfoSpan system meet the department's record keeping and reporting requirements to provide sufficient audit trail information in conducting sample sales and use tax audits?
Answer
The InfoSpan system provides a useful audit tool for isolating corporate purchasing card transactions during the audit process. Internal records must also be maintained to substantiate different categories of transactions. For example, a corporate purchasing card may categorize all transactions assigned to a certain account number as exempt from the sales tax. Internal records must be maintained to substantiate that only tax exempt items are assigned to that account.
IV. Auditing Purchasing Card Transactions
What audit procedures and document production requirements will be imposed by the department when auditing corporate purchasing card transactions?
Answer
See Answer to Scenario III. Internal records must be maintained by the purchaser and seller detailing individual accounts and transactions for audit purposes.
V. Purchasing Card Users Agreements with the States
Does Virginia have the statutory authority to enter into "managed audit programs' for companies using the corporate purchasing card use tax accrual system?
Answer
Yes. Each managed audit program used in Virginia is specifically tailored to the company utilizing such program. Each program is approved by the department prior to implementation, and accruals are based on historical use tax reporting trends of the company.
I hope the above has answered all questions relating to your client's corporate purchasing card program. If you should have any additional questions, please call ***** Office of Tax Policy, at *****.
Dear ****
This will reply to your letter in which you request a ruling regarding the record keeping requirements, for sales and use tax purposes, for users of corporate credit cards. I apologize for the delay in our response.
FACTS
n an effort to cut cost and reduce paper documentation, many businesses are implementing corporate purchasing card programs. These programs result in improved efficiency and reduction in costs of the procurement functions. In order to provide their clients with the proper information, ***** (the "Taxpayer'), is requesting a ruling as to Virginia record keeping requirements as they relate to various scenarios, all of which will be addressed separately below.
RULING
Code of Virginia Sec. 58.1-633 statutorily provides for dealer record keeping requirements and provides for the following:
-
- Every dealer required to make a return and pay or collect any tax under this chapter shall keep and preserve suitable records of the sales, leases, or purchases, as the case may be, taxable under this chapter, and such other books of accounts as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner.
Keeping the above in mind, I will address each scenario presented in your letter separately below.
I. Adequacy of Level II Data for Documenting Tax Paid
Level II provides enhanced record keeping data for corporate purchasing card transactions. When a corporate purchasing card is used with a Level II capable vendor, the vendor is prompted at the point of sale to input additional information regarding the transaction. Level II requires the vendor to input the amount of tax paid on the total transaction. Level II does not separately state each purchase for the total transaction.
Question
Does Level II tax data on the cardholder's statement provide adequate sales or use tax documentation in lieu of an itemized receipt? If not, what additional documentation will be required?
Answer
The Level II tax data is sufficient provided there are no exempt sales or purchases included in the total transaction. If exempt sales are included in the total transaction, the vendor and the purchaser must maintain internal itemized records to substantiate all exempt sales and purchases included in the total transaction.
II. Calculation of the Use Tax Accrual Based on the Best Practices Tax Model
The Best Practices Tax Model is a system for identifying use tax accruals on corporate purchasing card transactions. The system automatically eliminates transactions which have a definitive tax status, i.e., transactions between vendors and purchasers located in the same state, identifiable exempt purchases/sales, interstate commerce sales where the vendor does not have nexus in the purchasers state, etc. The model categorizes all transactions as either i) exempt, ii) taxed by a dealer, or iii) use tax due. All "use tax due' transactions will be totaled and the use tax accrual amount will be calculated for the Purchasers convenience.
Question
Does the Best Practices Tax Model meet the record keeping and reporting requirements for sales and use tax in Virginia?
Answer
The Best Practice Tax Model provides to a purchaser using a corporate purchasing card the total of all unidentifiable transactions for which the tax status cannot be determined. This model also calculates the use tax due on these transactions based on the location of the purchaser. The Best Practices Tax Model meets the record keeping and reporting requirements for sales and use tax in Virginia. However, sellers and purchasers must maintain adequate internal records to substantiate all nontaxed purchases and sales.
III. Program for Auditing InfoSpan-Calculated Use Tax Accrual
The InfoSpan software program is a program designed to help manage the corporate purchasing card program for audit purposes. This program filters out various taxable and exempt purchasing card transactions to determine whether or not the tax application is being properly applied. This includes Level II transactions, use tax accruals, out-of-state vendors, exempt sales, transactions associated with various taxable or exempt account numbers, manually reviewed high-dollar transactions, etc.
Question
Does the InfoSpan system meet the department's record keeping and reporting requirements to provide sufficient audit trail information in conducting sample sales and use tax audits?
Answer
The InfoSpan system provides a useful audit tool for isolating corporate purchasing card transactions during the audit process. Internal records must also be maintained to substantiate different categories of transactions. For example, a corporate purchasing card may categorize all transactions assigned to a certain account number as exempt from the sales tax. Internal records must be maintained to substantiate that only tax exempt items are assigned to that account.
IV. Auditing Purchasing Card Transactions
What audit procedures and document production requirements will be imposed by the department when auditing corporate purchasing card transactions?
Answer
See Answer to Scenario III. Internal records must be maintained by the purchaser and seller detailing individual accounts and transactions for audit purposes.
V. Purchasing Card Users Agreements with the States
Does Virginia have the statutory authority to enter into "managed audit programs' for companies using the corporate purchasing card use tax accrual system?
Answer
Yes. Each managed audit program used in Virginia is specifically tailored to the company utilizing such program. Each program is approved by the department prior to implementation, and accruals are based on historical use tax reporting trends of the company.
I hope the above has answered all questions relating to your client's corporate purchasing card program. If you should have any additional questions, please call ***** Office of Tax Policy, at *****.
Rulings of the Tax Commissioner