On April 19, 2011, the Connecticut Supreme Court upheld the ruling of the Tax Session of the Superior Court in a Connecticut DRS Sales Tax case that summary tapes from cash registers, commonly referred to as “Z Tapes”, were not equivalent to cash register tapes and therefore were not sufficient to meet the taxpayer’s burden of maintaining business records as required under the Connecticut Regulations.
We handle a significant number of sales tax examinations, we can assure you that, until this decision, most business owners and their tax professionals have assumed that the Z Tape printed from their register was sufficient for proving the businesses sales tax numbers in a CT DRS Exam. The Court’s decision proves otherwise.
Connecticut Agency Regulation § 12-2-12(b)(1) states that:
“A taxpayer shall maintain all records that are necessary to a determination of correct tax liability under the affected tax law provisions. All required records shall be made available upon request by the commissioner or his authorized representatives as provided for in the affected tax law provisions. Such records include, but are not limited to: books of account, invoices, sales receipts, cash register tapes, purchase orders, exemption certificates, returns, and schedules and working papers used in connection with the preparation of returns.” [Emphasis added]
It is our experience that the CT DRS, whether the business is in Stamford, CT or elsewhere, will seek the original receipts showing each sales, and if they are unavailable, will then the DRS will use its own method for determining the taxpayer’s income, typically the industry standard mark-up, to calculate gross receipts. Such determination may bear little resemblance to the taxpayer’s sales, but nevertheless shall be presumed correct unless the taxpayer can clearly show the Commissioner’s assessment to be erroneous, a near impossible burden.
We cannot recommend enough that business owners and their tax professionals maintain all of the sales receipts. They will be required to defend the business’s sales numbers in the event the business is selected by the CT DRS for a sales tax examination.
If you have any questions regarding business records for Connecticut DRS sales tax audits in Stamford, CT or elsewhere in Connecticut, do not hesitate to contact me at (203) 602-5550 or by email at egreen@convicerpercy.com.
Eric L. Green, Esq.
Convicer, Percy & Green, LLP
60 Long Ridge Rd., Suite 202
Stamford, CT 06902
Ph. (203) 602-5550
Fax (203) 286-1311
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