The Fair Tax Act, Part XXXVI
Today I am posting sections 508 and 509, which cover audits, summons, and records. Not fun stuff for most of us, but we are blogging the whole thing here!
`SEC. 508. SUMMONS, EXAMINATIONS, AUDITS, ETC.
`(a) Summons- Persons are subject to administrative summons by the sales tax administering authority for records, documents, and testimony required by the sales tax administering authority to accurately determine liability for tax under this subtitle. A summons shall be served by the sales tax administering authority by an attested copy delivered in hand to the person to whom it is directed or left at his last known address. The summons shall describe with reasonable certainty what is sought.
`(b) Examinations and Audits- The sales tax administering authority has the authority to conduct at a reasonable time and place examinations and audits of persons who are or may be liable to collect and remit tax imposed by this subtitle and to examine the books, papers, records, or other data of such persons which may be relevant or material to the determination of tax due.
`(c) Limitation on Authority in Case of Referral- No administrative summons may be issued by the sales tax administering authority and no action be commenced to enforce an administrative summons with respect to any person if a Justice Department referral or referral to a State Attorney General’s Office is in effect with respect to such person relating to a tax imposed by this subtitle. Such referral is in effect with respect to any person if the sales tax administering authority or the Secretary has recommended to the Justice Department or a State Attorney General’s Office a grand jury investigation of such person or a criminal prosecution of such person that contemplates criminal sanctions under this title. A referral shall be terminated when–
`(1) the Justice Department or a State Attorney General’s Office notifies the sales tax administering authority or the Secretary that he will not–
`(A) prosecute such person for any offense connected with the internal revenue laws,
`(B) authorize a grand jury investigation of such person with respect to such offense, or
`(C) continue such a grand jury investigation, or
`(2) a final disposition has been made of any criminal proceeding connected with the internal revenue laws, or conforming State sales tax, against such person.
So the tax authorities can perform audits on tax collecting businesses (but generally not consumers except for those who are operating as taxable employers), except if you are currently under some kind of Federal Investigation at the time.
`SEC. 509. RECORDS.
`Any person liable to remit taxes pursuant to this subtitle shall keep records (including a record of all section 510 receipts provided, complete records of intermediate and export sales, including purchaser’s intermediate and export sales certificates and tax number and the net of tax amount of purchase) sufficient to determine the amounts reported, collected, and remitted for a period of 6 years after the latter of the filing of the report for which the records formed the basis or when the report was due to be filed. Any purchaser who purchased taxable property or services but did not pay tax by reason of asserting an intermediate and export sales exemption shall keep records sufficient to determine whether said exemption was valid for a period of 7 years after the purchase of taxable property or services.
So businesses should keep their receipts for 6 years for their own business and receipts for things they bought tax-free for 7 years. My old boss used to keep his business records for 10 years, so I guess this is a reasonable requirement.
