Without Required Records, Taxpayer Could Not Overcome Presumption of Taxability

Friday, May 23rd, 2014

Rhode Island

The Rhode Island Division of Taxation ("Division") recently released a decision that a taxpayer was liable for tax on sales from its liquor store because the taxpayer could not present records showing otherwise.

Rhode Island requires retailers to keep records of sales tax they collect. The records must be open for inspection by the state. These records include register tapes, invoices, and receipts. It is the taxpayer's burden to show that a sale is not subject to tax. If the taxpayer does not show this, the state will assume the sale is taxable.

The taxpayer argued that a portion of its sales were not subject to tax. However, it did not have register tapes, invoices, or receipts to prove this. The taxpayer only had bank records to substantiate its claims. The bank records did not contain enough information for the state to discern whether sales were taxable or not. The taxpayer had not presented enough evidence to show that the sales were not taxable, so the sales were taxable.

In addition, the taxpayer was subject to penalties for failing to keep adequate records. Rhode Island treats the failure to maintain required records as evidence of negligence or of intent to evade tax. Because the taxpayer did not maintain any records of sales tax collected, the Division found that the taxpayer intended to evade tax. The taxpayer was therefore subject to penalties.


About TTR

Transaction (buying or selling things), Tax (the tax on this activity), Resources (our people, our website, our support services) - TTR, Inc.

TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at www.ttrus.com or call 866.578.8193.

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