Our blog series is winding down. Tip number 9, Scan Source Documents, is this weeks topic. Stayed tuned for next week when tell you our tenth and final best practice.
Sales and use tax is commonly referred to as a “form over substance” tax, as auditors tend to place a great amount of credence on the specific invoice details to dictate the proper tax treatment of the purchase. In this day and age, it is becoming increasingly more common for companies to adopt an invoice scanning policy to help facilitate audits, eliminate unnecessary storage expenses, and better manage the document retention processes. If your company has already adopted such a policy, you may want to research the level of effort and/or costs associated with expanding the process to include contracts, service agreements, purchase orders, and other pertinent documents. By having these documents easily accessible in an electric format, they can aid the decision making process and help overcome costly issues that arise when vendors make invoicing mistakes.
As a general rule of thumb, all documents should be retained for a rolling 5 to 7 years. This term will typically cover the applicable statutes for most state and local taxes, assuming all returns have been regularly filed and there are not any open audits or waivers requiring additional periods to be retained.