Ill. Admin. Code tit. 86, § 130.801 - Books and Records - General Requirements
a)
Every person engaged in the
business of selling tangible personal property at retail in this State shall
keep records and books of all sales and purchases of tangible
personal property, including all sales and purchase invoices, purchase
orders, merchandise records and requisitions, inventory records
prepared as of December 31 of each year or otherwise annually, as has
been the custom in the specific trade [35 ILCS 120/7
], credit memos, debit memos, bills of lading, shipping
records, and all other records pertaining to any and all purchases and sales of
goods whether or not the retailer believes them to be taxable under the Act;
and the retailer shall also keep summaries, recapitulations, totals, journal
entries, ledger accounts, accounts receivable records, accounts payable
records, statements, tax returns with all schedules or pertinent working papers
used in connection with the preparation of such returns, and other documents
listing, summarizing or pertaining to such sales, purchases, inventory changes,
shipments, or other transactions. For a description of what records constitute
the minimum required, including the use of machine-sensible records and
electronic data interchange, see Section
130.805 of this Part.
b) Retailers must maintain complete books and
records covering receipts from all sales and distinguishing taxable from
nontaxable receipts.
c) The books
and records must clearly indicate and explain all the information, deductions
as well as gross receipts, required for tax returns.
d) If a taxpayer retains records required to
be retained under this Section in both machine-sensible and hard-copy formats,
the taxpayer shall, upon request, make the records available to the Department
in machine-sensible format in accordance with Section
130.805(b)(5).
e) The books and records and other
papers and documents which are required by the Act to be kept
shall be kept in the English language and shall, at all times during business
hours of the day, be subject to inspection by the Department or its duly
authorized agents and employees. [35 ILCS 120/7
]
f) The books and records must be
kept within Illinois except in instances where a business has several branches,
with the head office being located outside Illinois, and where all books and
records have been regularly kept outside the State at such head office. Under
such circumstances, upon written permission from the Department, books and
records may be kept outside Illinois, but the taxpayer must, within a
reasonable time after notification by the Department, make all pertinent books,
records, papers, and documents available at some point within Illinois for the
purpose of the inspection and audit as the Department may deem
necessary.
g) Request for Books and
Records and Documentation During an Audit
1)
At the initiation of an audit, the Department will notify the taxpayer of the
books and records that the taxpayer will be required to produce to enable the
Department to conduct the audit. During the course of the audit, the Department
will provide the taxpayer with information document requests (Form EDA-70 or
EDA-70C, "Information Document Request") for books and records the Department
is requesting the taxpayer to produce for review. The taxpayer will be provided
30 days, or the number of days agreed to by the taxpayer and the Department, to
respond to an Information Document Request. If the taxpayer and the Department
cannot agree on a date to respond to a request, the taxpayer shall have 30 days
to respond. If the taxpayer does not provide the Department with the books and
records requested in the Information Document Request, the Department will
issue a second Information Document Request for the books and records. The
taxpayer shall have 30 days to respond to the second Information Document
Request. If the taxpayer again fails to provide the Department with the books
and records requested, the Department is authorized to issue a written demand
for the books and records pursuant to subsection (i)(3).
2)
It shall be presumed that all
sales of tangible personal property are subject to tax under the Act
until the contrary is established. The burden of proving that a
transaction is not taxable shall be upon the person who would be required to
remit the tax to the Department if the transaction is taxable. In the course of
any audit or investigation or hearing by the Department with reference to a
given taxpayer, if the Department finds that the taxpayer lacks documentary
evidence needed to support the taxpayer's claim to exemption from tax, the
Department is authorized to notify the taxpayer in writing to produce such
evidence (Form EDA-11-B or EDA-11-BC, "Notice of Demand for
Documentary Evidence"), and the taxpayer shall have 60 days subject to
the right in the Department to extend this period either on request for good
cause shown or on its own motion from the date when such notice is sent to the
taxpayer by certified or registered mail (or delivered to the taxpayer if the
notice is served personally) in which to obtain and produce such evidence for
the Department's inspection and audit, failing which the matter shall be
closed, and the transaction shall be conclusively presumed to be
taxable. [35 ILCS 120/7 ] In the course of
any audit or investigation by the Department with reference to a given
taxpayer, if the taxpayer fails to produce the documentary evidence needed to
support the taxpayer's claim to exemption from tax within the 60 days or the
time allotted, the taxpayer's claim to exemption will be denied and the
transactions will be conclusively presumed to be taxable.
EXAMPLE: The auditor requests all the resale certificates and exemption certificates for all tax-exempt sales. The auditor has issued an Information Document Request pursuant to subsection (g)(1). The retailer has failed to provide the documentary evidence required to support the exemptions. The Department issued a written request (Form EDA-11-B or Form EDA-11-BC, "Notice of Demand for Documentary Evidence") pursuant to subsection (g)(2) and provided the taxpayer 60 days to produce the documentation. If the retailer has not provided all of the certificates after the 60 days has elapsed, the matter will be closed and the transactions will be conclusively presumed to be taxable. Records penalty cannot be applied solely based on the lack of records associated with the Form EDA-11-B or EDA-11-BC, Notice of Demand for Documentary Evidence.
h) All books and records kept by a medical
cannabis dispensing organization under the Compassionate Use of Medical
Cannabis Program Act or kept by a dispensing organization pursuant to rules
adopted by the Illinois Department of Financial and Professional Regulation to
implement the Compassionate Use of Medical Cannabis Program Act and the
Cannabis Regulation and Tax Act shall, at all times during business hours of
the day, be subject to inspection by the Department or its duly authorized
agents and employees.
i)
Any person who fails to keep books and records or fails to produce
books and records for examination, as required by Section 7 of the Act
and this Part, is liable to pay to the Department, for deposit into the
Tax Compliance and Administration Fund, a penalty of $1,000 for the first
failure to keep books and records or produce books and records for examination
and a penalty of $3,000 for each subsequent failure to keep books and records
or produce books and records for examination as required by Section 7
of the Act and this Part. The penalties imposed under Section
7 of the Act and this subsection (i) shall not apply if the taxpayer
shows that it acted with ordinary business care and
prudence. [35 ILCS 120/7 ]
1) The Act imposes two requirements on
retailers: retailers must maintain books and records (see subsection (a)) and
they must produce the books and records for inspection and examination by the
Department upon request (see subsection (e)). A retailer may be subject to the
penalty in this subsection (i) if it maintains books and records but fails or
refuses to produce the records upon request of the Department. A retailer also
maybe subject to the penalty in this subsection (i) if it does not maintain
books and records and therefore cannot produce the books and records to the
Department upon request. In the latter case, the retailer may be subject to
either a penalty for the failure to maintain books and records or the failure
to produce books and records; the Department cannot impose two penalties in
this case.
2) If a person fails to
produce books and records for examination or inspection by the Department upon
request, a prima facie presumption shall arise that the person has failed to
keep the books and records so required. A person who is unable to rebut this
presumption is subject to the penalty provided in this subsection (i).
Taxpayers must take reasonable steps to safeguard books and records from the
elements and nature to protect the integrity of the records. Producing books
and records that are illegible or unsafe for Department employees to handle
shall be considered a failure to produce books and records and shall result in
penalties being assessed in this subsection (i).
3) Except as otherwise provided by subsection
(i)(8)(A), if a request has been made and not honored, prior to issuing a
notice of penalty for a failure to maintain books and records or a failure to
produce books and records, the Department must provide the taxpayer with a
written demand (Form EDA-11-A or EDA-11-AC, "Notice of Demand for Books and
Records").
A) The Notice of Demand for Books
and Records shall contain:
i) the name of the
person receiving the request;
ii)
the name of the business;
iii) the
date of the request or requests;
iv) the books and records
requested;
v) the books and records
that the person failed to produce;
vi) the number of days the person has to
produce the books and records; and
vii) the name of the Department agent or
employee.
B) The
Department agent or employee shall sign and date the form and provide a copy of
the form to the person either in person or by mail. The person shall have 30
days from the date of the Notice of Demand for Books and Records to produce the
books and records the person has failed to produce. The Department is
authorized to extend the period either on written request for good cause shown
or on its own motion. If the person fails to produce the books and records
within the time allotted, the Department shall issue a notice of penalty
pursuant to this subsection (i).
4) Any person receiving a notice of penalty
may:
A) within 60 days after the date on the
notice of penalty, protest and request an administrative hearing in writing.
Upon receiving a request for a hearing, the Department shall give notice to the
person requesting the hearing of the time and place fixed for the hearing and
shall hold a hearing in conformity with the provisions of the Act, and then
issue its final administrative decision in the matter to that person. In the
absence of a protest and request for a hearing within 60 days, the Department's
decision shall become final without any further determination being made or
notice given; or
B) if penalties
and interest exceed $15,000, file a petition with the Independent Tax Tribunal
within 60 days, or 30 days for cases involving the International Fuel Tax
Agreement, after the date on the notice of penalty. For procedural information
for the Independent Tax Tribunal, see 86 Ill. Adm. Code 5000, Subpart
D.
5) The Department
cannot impose more than one penalty for failure to produce books and records
for a calendar month.
EXAMPLE 1: An authorized agent of the Department inspects a retailer and requests the records for the first week in April. The retailer does not produce the records. The agent subsequently requests the records for the remaining 3 weeks in April. The retailer does not produce the records. The agent can assess only one penalty for the month of April.
EXAMPLE 2: In April, an authorized agent of the Department inspects a retailer and requests all purchase invoices for tangible personal property purchased in March. The purchase invoices are not provided by the retailer and the Department issues a notice of penalty in the amount of $1,000. The agent returns in May and requests to see all the cigarette sales receipts for March. The retailer fails to produce the sales receipts. The Department cannot issue a penalty for failure of the retailer to provide sales receipts for March because the agent has previously issued a notice of penalty for failure to produce the purchase invoices for March.
6) A records request can cover multiple
periods. The Department is authorized to issue a separate penalty for each
period.
EXAMPLE: An auditor makes multiple requests for books and records for the months of January through July. The retailer cannot produce the books and records for any of the months. The auditor fills out a Notice of Demand for Books and Records, provides a copy to the person, and provides 30 days for the person to produce the books and records. After the 30-day period expires, the retailer does not produce the books and records. The Department issues a notice of penalty in the amount of $1,000 for the month of January and $3,000 for each of the months February through July, for a total penalty of $19,000.
7)
The
penalties imposed under this subsection (i) shall not apply if
the taxpayer shows that it acted with ordinary business care
and prudence. [35 ILCS 120/7 ] When determining
whether a taxpayer has acted with ordinary business care and prudence, the
Department will consider the size of the business, the amount of gross
receipts, the volume of sales, the nature of the business, the type and number
of items sold by the business, the types of books and records requested, and
whether the books and records constitute the minimum records required by
Section 130.805. In other words, would a
taxpayer that exercised ordinary business care and prudence be able to produce
the books and records requested by the Department? "Ordinary care has been
defined to be that degree of care which is exercised by ordinarily prudent
persons under same or similar circumstances." Swenson v. City of Rockford, 9
Ill.2d 122, 127 (1956).
8) Requests
for Books and Records at the Beginning and During Scheduled Audits
A) When the Department determines it will
audit a taxpayer's books and records, it shall notify the taxpayer of the audit
and schedule a time to commence the audit that is satisfactory to the
Department and the taxpayer. In no event can this time be later than 6 months
after the date of the notice, unless the Department agrees to extend the
6-month period. If the taxpayer refuses to schedule the commencement of the
audit within 6 months after the date of the notice, the taxpayer is subject to
a penalty for refusal to produce books and records for every month subject to
the audit. After the 6-month period has expired, the Department may issue a
notice of penalty to the taxpayer pursuant to this subsection (i). The
Department is not required to provide the taxpayer with a document request or
allow additional time to schedule an audit of the person's books and
records.
B) During the course of an
audit, the auditor may issue multiple requests for specific books and records.
Prior to issuing the first notice of penalty during an audit, the auditor shall
complete a Notice of Demand for Books and Records in accordance with subsection
(i) that identifies all books and records that have not been provided pursuant
to all earlier requests for the production of documents.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.