A. PURPOSE. The purpose of this rule is to
define the requirements imposed on taxpayers for the maintenance and retention
of books, records, and other sources of information under the Arkansas Tax
Procedure Act (codified at Ark. Code Ann. § 2618-101 et seq.). It is also
the purpose of the rule to address these requirements where all or a part of
the taxpayer's records are received, created, maintained or generated through
various computer, electronic and imaging processes and systems. This rule will
govern the record keeping and record retention requirements of taxpayers unless
otherwise provided by law.
1. "Database Management System"
means a software system that controls, relates, retrieves, and provides
accessibility to data stored in a database.
2. "Electronic data interchange" or "EDI
technology" means the computer-to-computer exchange of business transactions in
a standardized structured electronic format.
3. "Hard copy" means any documents, records,
reports or other data printed on paper.
4. "Machine-sensible record" means a
collection of related information in an electronic format. Machine-sensible
records do not include hard-copy records that are created or recorded on paper
or stored in or by an imaging system such as microfilm, microfiche, or
storage-only imaging systems.
"Storage-only imaging system" means a system of computer hardware and software
that provides for the storage, retention and retrieval of documents originally
created on paper. It does not include any system, or part of a system, that
manipulates or processes any information or data contained on the document in
any manner other than to reproduce the document in hard copy or as an optical
6. "Taxpayer" as used in
this rule means any person subject to or liable for any state tax; any person
required to file a return, or to pay, or withhold and remit any tax required by
the provisions of any state tax law; or any person required to obtain a license
or a permit or to keep any records under the provisions of any state tax
REQUIREMENTS - GENERAL.
1. A taxpayer shall
maintain all records that are necessary to a determination of the correct tax
liability under the Arkansas Tax Procedure Act. All required records must be
made available on request by the Director or his authorized representatives as
provided for in Ark. Code Ann. §
Such records shall include, but not be necessarily limited to: normal books of
account ordinarily maintained by the average prudent businessman engaged in
such business, all bills, receipts, invoices, cash register tapes, or other
documents of original entry supporting the entries in the books of account, and
all schedules or working papers used in connection with the preparation of tax
2. If a taxpayer retains
records required to be retained under this rule in both machine-sensible and
hard-copy formats, the taxpayer may make the records available to the Director
in machine-sensible format upon request of the Director.
3. Nothing in this rule shall be construed to
prohibit a taxpayer from demonstrating tax compliance with traditional
hard-copy documents or reproductions thereof, in whole or in part, whether or
not such taxpayer also has retained or has the capability to retain records on
electronic or other storage media in accordance with this rule.
RECORD KEEPING REQUIREMENTS -
a. Machine-sensible records used
to establish tax compliance shall contain sufficient transaction-level detail
information so that the details underlying the machine-sensible records can be
identified and made available to the Director upon request. A taxpayer has
discretion to discard duplicated records and redundant information provided its
responsibilities under this rule are met.
b. At the time of an examination, the
retained records must be capable of being retrieved and converted to a standard
c. Taxpayers are not
required to construct machine-sensible records other than those created in the
ordinary course of business. A taxpayer who does not create the electronic
equivalent of a traditional paper document in the ordinary course of business
is not required to construct such a record for tax purposes.
Electronic Data Interchange
a. Where a taxpayer uses
electronic data interchange processes and technology, the level of record
detail, in combination with other records related to the transactions, must be
equivalent to that contained in an acceptable paper record. For example, the
retained records should contain such information as vendor name, invoice date,
product description, quantity purchased, price, amount of tax, indication of
tax status, shipping detail, etc. Codes may be used to identify some or all of
the data elements, provided that the taxpayer provides a method which allows
the Director to interpret the coded information.
b. The taxpayer may capture the information
necessary to satisfy GR-80(D)(2)(a) at any level within the accounting system
and need not retain the original EDI transaction records provided the audit
trail, authenticity, and integrity of the retained records can be established.
For example, a taxpayer using electronic data interchange technology receives
electronic invoices from its suppliers. The taxpayer decides to retain the
invoice data from completed and verified EDI transactions in its accounts
payable system rather than to retain the EDI transactions themselves. Since
neither the EDI transaction nor the accounts payable system captures
information from the invoice pertaining to product description and vendor name
(i.e., they contain only codes for that information), the taxpayer also retains
other records, such as its vendor master file and product code description
lists and makes them available to the Director. In this example, the taxpayer
need not retain its EDI transaction for tax purposes.
3. Electronic Data Processing Systems
Requirements. The requirements for an electronic data processing accounting
system should be similar to that of a manual accounting system, in that an
adequately designed accounting system should incorporate methods and records
that will satisfy the requirements of this rule.
Business Process Information.
a. Upon the request of the Director, the
taxpayer shall provide a description of the business process that created the
retained records. Such description shall include the relationship between the
records and the tax documents prepared by the taxpayer and the measures
employed to ensure the integrity of the records.
The taxpayer shall be capable of
demonstrating the following:
(1) The functions
being performed as they relate to the flow of data through the
(2) The internal controls
used to ensure accurate and reliable processing; and
(3) The internal controls used to prevent
unauthorized addition, alteration, or deletion of retained records.
The following specific
documentation is required for machine-sensible records retained pursuant to
(1) Record formats or
(2) Field definitions
(including the meaning of all codes used to represent information);
(3) File descriptions (e.g., data set name);
(4) Detailed charts of accounts
and account descriptions.
RECORDS MAINTENANCE REQUIREMENTS.
1. The Director recommends but does not
require that taxpayers refer to the National Archives and Record
Administration's ("NARA") standards for guidance on the maintenance and storage
of electronic records, such as the labeling of records, the location and
security of the storage environment, the creation of back-up copies, and the
use of periodic testing to confirm the continued integrity of the records. [The
NARA standards may be found at 36 Code of Federal Regulations, Part 1234, July
1, 1995, edition.]
taxpayer's computer hardware or software shall accommodate the extraction and
conversion of retained machine-sensible records.
ACCESS TO MACHINE-SENSIBLE RECORDS.
1. The manner in which the Director is
provided access to machine-sensible records as required in GR-80(C)(2) of this
rule may be satisfied through a variety of means that shall take into account a
taxpayer's facts and circumstances through consultation with the
Such access will be
provided in one or more of the following manners:
a. The taxpayer may arrange to provide the
Director with the hardware, software and personnel resources to access the
taxpayer may arrange for a third party to provide the hardware, software and
personnel resources necessary to access the machine-sensible records.
c. The taxpayer may convert the
machine-sensible records to a standard record format specified by the Director,
including copies of files, on a magnetic medium that is agreed to by the
d. The taxpayer and the
Director may agree on other means of providing access to the machine-sensible
TAXPAYER RESPONSIBILITY AND DISCRETIONARY AUTHORITY.
1. In conjunction with meeting the
requirements of GR-80(D), a taxpayer may create files solely for the use of the
Director. For example, if a data base management system is used, it is
consistent with this rule for the taxpayer to create and retain a file that
contains the transaction-level detail from the data base management system and
that meets the requirements of GR-80(D). The taxpayer should document the
process that created the separate file to show the relationship between that
file and the original records.
taxpayer may contract with a third party to provide custodial or management
services of the records. Such a contract shall not relieve the taxpayer of its
responsibilities under this rule.
ALTERNATIVE STORAGE MEDIA.
1. For purposes of storage and retention,
taxpayers may convert hard-copy documents received or produced in the normal
course of business and required to be retained under this rule to microfilm,
microfiche or other storage-only imaging systems and may discard the original
hard-copy documents, provided the conditions of this section are met. Documents
which may be stored on these media include, but are not limited to general
books of account, journals, voucher registers, general and subsidiary ledgers,
and supporting records of details, such as sales invoices, purchase invoices,
exemption certificates, and credit memoranda.
Microfilm, microfiche and other
storage-only imaging systems shall meet the following requirements:
a. Documentation establishing the procedures
for converting the hard-copy documents to microfilm, microfiche or other
storage-only imaging system must be maintained and made available on request.
Such documentation shall, at a minimum, contain a sufficient description to
allow an original document to be followed through the conversion system as well
as internal procedures established for inspection and quality
b. Procedures must be
established for the effective identification, processing, storage, and
preservation of the stored documents and for making them available for the
period they are required to be retained under GR-80(J).
c. Upon request by the Director, a taxpayer
must provide facilities and equipment for reading, locating, and reproducing
any documents maintained on microfilm, microfiche or other storage-only imaging
d. When displayed on such
equipment or reproduced on paper, the documents must exhibit a high degree of
legibility and readability. For this purpose, legibility is defined as the
quality of a letter or numeral that enables the observer to identify it
positively and quickly to the exclusion of all other letters or numerals.
Readability is defined as the quality of a group of letters or numerals being
recognizable as words or complete numbers.
e. All data stored on microfilm, microfiche
or other storage-only imaging systems must be maintained and arranged in a
manner that permits the location of any particular record.
f. There is no substantial evidence that the
microfilm, microfiche or other storage-only imaging system lacks authenticity
EFFECT ON HARD-COPY RECORDKEEPING
1. Except as otherwise provided
in this section, the provisions of this rule do not relieve taxpayers of the
responsibility to retain hard-copy records that are created or received in the
ordinary course of business as required by existing law and rules. Hard-copy
records may be retained on a record keeping medium as provided in GR-80(H) of
2. If hard-copy records
are not produced or received in the ordinary course of transacting business
(e.g., when the taxpayer uses electronic data interchange technology), such
hard-copy records need not be created.
3. Hard-copy records generated at the time of
a transaction using a credit or debit card must be retained unless all the
details necessary to determine correct tax liability relating to the
transaction are subsequently received and retained by the taxpayer in
accordance with this rule. Such details include those listed in
printouts that are created for validation, control, or other temporary purposes
need not be retained.
5. Nothing in
this section shall prevent the Director from requesting hard-copy printouts in
lieu of retained machine-sensible records at the time of examination.
RECORDS RETENTION - TIME
All records required to be retained under this rule shall be
preserved for six (6) years pursuant to Ark. Code Ann. §
unless the Director has provided in writing that the records are no longer