Regardless of the manner utilized, it’s extremely important to capture and document the information needed to answer questions auditors ask and that's why topic 4 is all about how to make traceable use tax accruals.

Here are some questions auditors tend to ask in this area:

• What invoice(s) are included in the accrual?
• What line items were accrued upon?
• How much tax was assessed on each line item and/or the entire invoice?
• How did you determine the proper situsing for the accrual?
• When and how did you remit payment?
• How does your documentation tie back to your return?

Although documentation efforts will vary among organizations, tax jurisdictions want detailed information for every accrual and adjustment booked to your payable account.  As such, it’s always good to pull as much of this information into your account as possible.  It also helps to establish a separate use tax payable account per jurisdiction and reconcile it on a regular monthly basis. 

Check, EFT, and/or ACH payments should always be debited to the payable account.  It’s best to have direct access to all payment information, including any associated images.  Also make sure that your payments tie to the return that was filed, and you have access to return copies and related schedules.

Don’t allow poor documentation to be the reason why an auditor denies “credit” for a valid accrual.  If you’re going to take the time to contemplate and calculate the accrual, please take a bit more time to properly document it.  It does make a difference!