Can a Texas business scan invoices and resale/exemption certificates and store them electronically instead of keeping paper copies?

Subject

Electronic imaging and storage of invoices and resale/exemption certificates

Plain-English summary

The Comptroller told this taxpayer that it's fine to switch from paper to electronic document imaging for storing purchase invoices and resale/exemption certificates. The taxpayer had asked whether Texas would still require hard copies once it started scanning these records. The answer was no, with two conditions attached: the firm still has to keep back-up hard copies of the resale/exemption certificates specifically, and it has to have enough equipment on hand so Comptroller auditors can actually examine the electronically stored records when they ask to. The letter notes it's a clarification of an earlier letter to the same taxpayer, with the clarified language shown in bold in the original.

What this means for you

Business owners considering document imaging

If you're thinking about scanning invoices and certificates to cut down on paper storage, this letter shows the Comptroller's basic approach: electronic imaging of business records is acceptable, but resale/exemption certificates need a back-up hard copy on top of the scanned image, and you need to be able to give an auditor access to view the electronic records (i.e., the right equipment/software) when requested.

Accountants and tax professionals

Note the letter doesn't require back-up hard copies of the invoices, only of the resale/exemption certificates — that's the one carve-out in an otherwise permissive letter. It also doesn't cite any statute or rule; it's phrased purely as the Division's position on the facts presented.

Common questions

Q: Can a business store invoices only electronically, with no paper copies?
A: Based on this letter, yes for invoices — the letter places no back-up hard-copy requirement on invoices, only on resale/exemption certificates.

Q: Do resale or exemption certificates need to be kept on paper too?
A: Yes. The letter specifically requires the firm to "maintain back-up hard copies of the resale/exemption certificates" even if it also stores them electronically.

Q: What do auditors need to be able to do with the electronic records?
A: The firm must "provide sufficient equipment for our auditors to examine the records on request" — meaning the equipment to view the electronic records has to be available when the Comptroller's auditors ask.

Q: Can other taxpayers rely on this letter?
A: No. It was issued to one taxpayer based on facts they presented, and the letter itself notes "this opinion is based on the facts presented" and that "other facts though similar may provide a different result." See the disclaimer below.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9305L1238A01

Original ruling text

May 10, 1993

Dear **:

This letter is to clarify my earlier letter to you regarding record retention
requirements for the state of Texas. The clarified language is denoted in bold
print. Your firm is considering purchasing document imaging equipment to scan
hard copy invoices and resale/exemption certificates for electronic storage and
retention. Your question is whether the state of Texas will still require your
company to maintain hard copies of these documents.

We have no problem with your firm maintaining business records such as purchase
invoices and resale/exemption certificates on electronic document imaging
equipment provided that you:

• maintain back-up hard copies of the resale/exemption certificates and

• provide sufficient equipment for our auditors to examine the records on
  request.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

If you have other questions or need more information, you may call me at
1-800-252-5555, extension 3-4502. The regular number is 512/463-4600. You may
also write to Tax Administration Division at the above address.

Sincerely,

Gilbert Zamora
Tax Administration Division

NOTE: Previous Accession Number 9305013L