Online Version of Brochure 15-007
Record Keeping and Document Retention Requirements
Every taxpayer is responsible for keeping records of all business activity.
The following is a guideline concerning that responsibility. Not all business records or situations may be covered in this limited space. Casinos, Beer or Tobacco Wholesalers, Petroleum Dealers and other specialized industries should review specific record requirements in the Rules and Regulations.
Mississippi Law requires every taxpayer to keep accurate, complete, and legible records. Records must be kept to determine the amount of tax due and reported for each transaction.
- Records must be written in English.
- All records such as bills, receipts, checks, invoices, and cash register tapes must include the transaction date.
- Records must be kept at least three (3) years.
- Records must be available for review by the Department of Revenue upon request.
- Records must be kept at the place of business. If the principal place of business is outside Mississippi, the records of the taxpayer may be kept at their principal place of business.
- If adequate records necessary to determine tax due are not kept, the DOR may determine the tax liability and make an assessment using any information available. In making the assessment, the DOR is not restricted to the type of audit method or the information used to determine the tax liability.
Examples of Records to Maintain Include:
- General ledgers, sales journals, purchase order books, cash receipts books, cash disbursement books;
- Canceled checks, bank statements, sales contracts, purchase invoices;
- Profit and loss statements, balance sheets
- State tax returns and reports; all schedules or work papers used in the preparation of tax reports or returns
- Copies of federal income returns filed with the Internal Revenue Service including all work-papers, schedules, and similar records
- Tax filings with other states including all work-papers, schedules, and similar records
- Records of loans, services, other non-sales transactions, and any non-business income.
- Descriptive materials such as a chart of accounts or an accounting policy manual.
- Any other records necessary to establish income, deductions, credits, or other information needed to determine the Mississippi tax liability.
In addition to other records listed above, the following records should be kept for sales tax:
- A separate set of sales records must be kept for each business location;
- Documentation including the sales invoice must be kept to prove any exemption or deduction from taxable sales;
- Every vendor making a sale to the holder of a Mississippi sales tax permit, direct pay permit, or material purchase certificate must keep a record of each sale. Necessary information includes a description of each item sold, price charged, date of sale, name and address of the purchaser, and permit number of the purchaser. A description of the item sold must be kept when the exemption is based on the nature of the product such as fertilizer;
- Complete records must be kept to support deductions for bad debts, returned merchandise, and canceled sales.
In addition to other records listed above, the following records should be kept for income tax:
- A taxpayer must keep sufficient records to establish the income, deductions, credits, and other items necessary for purposes of computing Mississippi income tax. This includes maintaining the same type of records and support for income and deductions required for federal purposes.
- Copies of Mississippi and federal returns must be maintained, including all schedules, W-2’s, 1099-Misc, 1099-R, federal K-1s, Mississippi K-1s, and any other documents.
In addition to other records listed above, the following records should be kept for withholding tax:
- Income tax withholding records that includes the name, address, and Social Security number of each employee
Information must be kept that provides the dates of employment; dates and amounts of wages paid; dates and amounts of taxes withheld;
- Mississippi and federal withholding exemption certificate(s) for each employee;
- Cancelled payroll checks;
- Copies of all W-2 forms and 1099 forms issued;
- Records of fringe benefits, expense reimbursements, retirement pay, travel expenses, vacation allowance, dismissal payments, tips, and other items required to be reported as wages.
In addition to other records listed above, corporate accounts should keep:
- Fixed asset ledgers by location with details of historical cost by year of acquisition;
- Inventory records by location, including details of inventory in-transit at year end;
- Work-papers or other records detailing the asset valuation method including copies of any appraisals in support of asset values;
- Rental and lease agreements with unrelated parties;
- Payroll records, including payroll ledgers by location;
- Copies of complete federal income returns including consolidated 1120 and supporting schedules;
- Sales journals and invoices detailing sales of tangible personal property by shipping point origin and destination;
- Sales journals and invoices detailing sales of services by transaction destination using a market approach;
- Records documenting the reasonable fair market rental rate for property owned by a related entity;
- Ownership and capital structure records;
- Corporate and committee minutes, company newsletters, travel expense reports, patents, company manuals, annual reports and similar public documents;
- Records supporting a change in accounting; and, documentation supporting a change in interpretation of Mississippi Tax Laws or Administrative Rules that include documents or records to support tax planning activities;
- Records to support tax credits authorized by Mississippi Law.
A taxpayer who creates electronic records in the ordinary course of business must keep those records and make them available for review upon request by the Commissioner. At the time of an examination, the electronic record must be capable of being retrieved and converted to a standard record format. The taxpayer may provide access to electronic records by:
- Converting the electronic records to a standard record format on a magnetic medium agreeable to the Commissioner;
- Providing the necessary hardware, software, and personnel resources to access the records; or
- Such other mutually agreeable method.
Electronic records used to establish tax compliance must contain sufficient detail of transactions as to allow for clear identification and retrieval of the documents and records underlying such transactions.
Taxpayers must retain hard-copy records that are created or received in the ordinary course of business. These records may be stored using an image system.
At the time of review by the DOR, the taxpayer must provide a description of the process that created the electronic records. That description includes the relationship between the records and the tax documents prepared by the taxpayer and the measures employed to ensure the integrity of the records. The taxpayer must be able to show:
- The flow of data through the system;
- The internal controls used to ensure accurate and reliable processing;
- The internal controls used to prevent unauthorized addition, alteration, or deletion of retained records.
The following specific documentation is required for electronic records retained:
- Record formats or layouts;
- Field definitions (including the meaning of codes used to represent information);
- File descriptions (data set name);
- Detailed charts of accounts and account descriptions;
- Evidence that the retained records reconcile to the accounting records and to the tax returns.
When a taxpayer uses electronic data interchange (EDI) processes and technology, record detail related to transactions, must be equivalent to that of an acceptable paper record.
This publication provides general information and does not constitute a regulation of the Department of Revenue. Please be aware that legislation, regulations, court decisions, notices, and announcements could affect the accuracy of this publication.
After July 1, 2010, any reference to Mississippi State Tax Commission, the State Tax Commission, the Tax Commission and/or commission shall mean Department of Revenue and any reference to the Commissioner of Revenue, the Chairman of the Mississippi State Tax Commission, the Chairman of the State Tax Commission, the Chairman of the Tax Commission and/or chairman shall mean Commissioner of Revenue of the Department of Revenue. (refer to § 27-3-4(4) Miss. Code Ann.)