CAT 2006-09 - Commercial Activity Tax: Records Retention
Requirements - Issued September, 2006; Revised October, 2006;
Revised January, 2007
This rule is to assist taxpayers in determining their record
retention responsibilities for the commercial activity tax
(CAT). This rule is now final and
effective. No further changes were made
following the October, 2006 revision. Please continue to
direct any questions to the CAT Division of the Ohio
Department of Taxation at 1-888-722-8829.
Rule 5703-29-18 Records retention
requirements.
(A) Pursuant to the authority granted under section 5751.12
of the Revised Code, the Tax Commissioner hereby promulgates
a rule that establishes a record retention policy for
purposes of the commercial activity tax. Under that section,
the commissioner may identify certain records that are
necessary for a person to maintain in order to show whether,
and the extent to which, that person is subject to the tax
imposed by Chapter 5751. of the Revised Code.
(B) For purposes of determining gross receipts under division
(F) of section 5751.01 of the Revised Code, all persons
subject to the tax imposed under section 5751.02 of the
Revised Code shall keep and maintain primary and supporting
records including but not limited to the following: sales
journals, financial statements, charts of accounts, cash
journals, annual reports, general ledgers, income statements
and tax returns, and invoices. In addition, all persons must
maintain organizational structures that reflect ownership and
control percentages as they exist in each filing period.
(C)(1) With regard to records concerning net operating loss
credits available under section 5751.53 of the Revised Code,
persons must retain records relating to such credit until
June 30, 2010. Since companies may generate net operating
losses long before being able to claim a deduction for the
loss, records relating to the calculation of the corporation
franchise tax reports for all years between the year the Ohio
net operating loss was generated and each year in which the
loss is being applied against Ohio taxable income must be
maintained until June 30, 2010. Further, the statute of
limitations does not prohibit either the commissioner or the
taxpayer from adjusting the net operating loss carried
forward from a tax year closed to assessment to a year still
open to assessment or refund. See Consumer Direct v.
Limbach (1991), 62 Ohio St. 3d 180.
(2) For example, Company A generated a net operating loss in
Ohio corporate franchise tax year 1989 (taxable year ending
in 1988). Because of previous losses and correlating loss
carryforward amounts, Company A does not begin to claim the
loss generated in the taxable year ending in 1988 until Ohio
corporate franchise tax year 2005 (taxable year ending in
2004). For purposes of claiming any credit for commercial
activity tax purposes, Company A is required to retain all
records relating to the calculation of the credit, including
all Ohio corporate franchise tax returns for the tax years
1989 through 2005 until June 30, 2010.
(D) All persons making purchases must maintain the purchase
records and make them available to the commissioner for
inspection in accordance with the provisions in section
5751.12 of the Revised Code. Such records must be maintained
for at least four years from the later of the filing of or
the due date of the return covering the period in which the
purchases were made.
(E) For purposes of divisions (E) and (I) of section 5751.033
of the Revised Code, any invoices or documents relating to
the situsing of receipts from the sale of tangible personal
property or from the sale of services must be maintained for
at least four years from the later of the filing of or the
due date of the return covering the period in which the sales
were made.
(F) This rule hereby incorporates by reference all records
discussed in previously issued information releases and/or
administrative rules relating to the commercial activity tax.
Pursuant to section 5751.12 of the Revised Code, all records
must be maintained for a period of four years from the later
of the filing of or the due date of the return covering the
period to which the records relate unless the commissioner
either consents in writing to their earlier destruction or,
by written order, extends the time period required for
retention.