97-078
Response January 28, 1998
December
12, 1997
Dear
Val:
This
letter is a belated follow-up to a conversation we had at the FTA conference in
Phoenix last May.
I
am requesting that the Department of Taxation issue guidance to our client
COMPANY A ("COMPANY A") regarding the sales and use tax treatment of
transactions paid for by charge cards issued under its corporate procurement
(or purchasing) card program. We have drafted the attached letter as a proposed
text for such guidance.
The
COMPANY A procurement card program includes, as a component, desktop software
packages that generate reports on sales tax paid at point of sale.COMPANY A is
requesting a letter clarifying that corporations participating in the
procurement card program can use these reports, which recap all procurement
card purchases, in lieu of vendor generated invoices for the purposes of sales
and use tax compliance documentation.
We
are not suggesting that the Tax Commission modify its standards on what
documentation
is
sufficient, only that it treat the information on the reports as the equivalent
of information on
vendor-generated
invoices.
We
understand the Commission has issued similar guidance to COMPANY B
("COMPANY
B"). This letter gives COMPANY B an unwarranted advantage in the market
place. Therefore,COMPANY A would appreciate it if the Commission would issue a
similar letter regarding COMPANY A's procurement card program.
In
addition,COMPANY A would like to participate, where appropriate, in any policy
discussions
or
activities that relate to or affect procurement card transactions.
Thank
you for your prompt attention to this matter. If you have any questions, feel
free to contact me at #####. We will, of course, be happy to provide you with
any additional information you may need about COMPANY A's procurement card program.
Sincerely,
NAME
January
28, 1998
NAME
ADDRESS
CITY
STATE ZIP
Advisory
Opinion - Corporate Purchasing Card Sales Tax Reporting System.
Dear
NAME,
We have received your request for
information pertaining to the records and reporting systems that can be used in
conjunction with sales transactions involving procurment cards. We offer the following guidance:
A taxpayer is required to maintain
sufficient sales tax documentation to demonstrate the following:
1. Transaction date (usually the purchase
date for sales tax purposes and the delivery date for use tax purposes).
2. Vendor.
3. Purchaser
(cardholder).
4. Total
amount of sale and total amount of sales or use tax paid.
5. Sufficient item description to distinguish
between taxable and non-taxable items.
6. Delivery
address (if different from the cardholder’s mailing address).
7. Separately
stated non-taxable charges.
8. FOB
information (if claiming an exemption for shipping charges).
9. After-sale
adjustments for discounts, returns, allowances, etc., must be traceable to the
original transaction.
As we understand your system, the
desktop reporting software programs associated with COMPANY A Purchasing Cards
will generate a sales tax report based on (1) information residing in your
database, (2) information supplied electronically by the vendor at the point of
sale, and (3) information provided by
the card-issuing institution. The
desktop reporting program database will always contain and report the vendor’s name, city and state; the
cardholder’s account number and name; the transaction amount; and the
transaction date. Your system must also
report the total amount of sale and total amount of tax, a shipping address zip
code, and a description of the item(s) sold.
Whenever an exemption is claimed for delivery or shipping charges, FOB
information, delivery address, or other required documentation must be
supplied. We understand that some
vendors will use point-of-sale device to supply this information.
You indicate that your system
identifies the delivery address by city, state and zip code. As stated in our prior correspondence, that
information is not sufficient to identify the taxing jurisdiction. If the cardholder implements a policy requiring
that all card purchases be shipped to the mailing address, that policy will
satisfy audit requirements so long as adherence to the policy is properly
documented. In the alternative, the
cardholder must retain separate documentation of delivery addresses.
After sale adjustments for
discounts, returns and allowances must be traceable back to the original
transaction. If the “merchant reference
number” enables an auditor to trace discounts, returns, allowances and other
adjustments back to the original transaction, use of that number will satify
our recordkeeping requirements.
For reporting purposes, we suggest
that taxable and nontaxable transactions be processed separately. Where there is a “mixed transaction,” the entire
amount is taxable unless the nontaxable transaction is separately itemized and
documented.
Based on these facts, the sales tax
report provided by your system will meet our data reporting requirements
provided that the vendor supplies the required information described here. If the report does not adequately document
the required information, the cardholder must supplement the report with
evidence of compliance.
For
the Commission,
Joe
B. Pacheco,
Commissioner
^^