Pub-113-SOT, Keeping Complete and Accurate Records

1. What records must I keep?
2. What records must I keep about the transfer of TPP incident to a sale of service and purchases I make?
3. What records are required to support a deduction taken on my return for an exempt transfer of TPP incident to a sale of service?
4. Must I maintain my records on paper?
5. How long must I keep records?
6. Are there any other requirements?
7. Are there any penalties for failing to keep books and records?

For a complete list of requirements see 86 Ill. Adm. Code Subpart H: Books and Records, Section 130.801-825.

As a Serviceperson, you must keep:

• records of all transfers of TPP incident to a sale of service and purchases you make;
• documents about inventory changes, shipments, or other transactions;
• accounts receivable records;
• accounts payable records;
• summaries or ledger accounts;
• records or working papers that are used in the preparation of your tax returns; and
• a copy of the tax returns you file.

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At minimum, you must keep

• the cash register tapes and other data that provide a daily record of the amount of transfers of TPP incident to a sale of service;
• a record of the merchandise purchased, such as the vendor’s invoices or purchase orders; and
• a yearly inventory of the stock on hand.

These records must distinguish taxable from nontaxable transfers of TPP incident to sales of service. You must keep these records for all transfers of TPP incident to a sale of service, regardless of whether you believe they are taxable. For destination-based transfers of TPP incident to sales of service, you must maintain records that include:

• the name and address of the customer to whom the bill was issued,
• the customer’s name and exact address (street number, street address, city, county, state, zip code) to which the TPP is shipped or delivered or at which possession is taken by the purchaser; and
• documentation to support the location from which the TPP was shipped.

Failure to maintain proper books and records may cause delays in processing your returns and may result in IDOR assessing penalties and interest.

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In general, in order to support each deduction, your records must include

• the purchaser’s name and address;
• the character of each transaction (e.g., a sale for resale or to an exempt organization);
• the date of each transaction;
• the amount of receipts from each transaction; and
• any other information that establishes the nontaxable nature of the transaction.

Information about the most common exemptions and specific record keeping requirements that apply to them is provided in PIO-101, Illinois Sales & Use Tax Matrix.

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No. You can also maintain records electronically. Your system must include a method to produce legible and readable records necessary to verify liability. For more information, see 86 Ill. Adm. Code Section 130.805.

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In general, you must keep records that document receipts for the reporting period covered by your return for three and one-half years after you have filed your last original or amended return.

If IDOR has issued you a Notice of Tax Liability or Final Notice of Tax Due, you must keep records that document receipts for the reporting period for which the notice was issued. Keep these records until the liability has been finalized or discharged.

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Your records must

• be available for inspection by IDOR during normal business hours;
• be kept in the English language;
• be kept in Illinois unless you have received written permission from us to keep them in another location; and
• contain information regarding the deductions you claim.

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Yes, any person who fails to keep books and records is liable to pay IDOR a penalty of $1,000 for the first failure to keep books and records and a penalty of $3,000 for each subsequent failure to keep books and records. See 86 Ill. Adm. Code 130.801(i) for more detail. Any person who, or any officer or director of any corporation, partner or member of any partnership, or manager or member of a limited liability company, that fails to keep books and records as required by 86 Ill. Adm. Code 130.801 is guilty of a Class A misdemeanor.

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