We electronically scan our resale and exemption certificates instead of keeping paper copies. Does the Comptroller still require us to keep the original hard copies for audit purposes?

Plain-English summary

Following a seminar on electronic tax filing and audit recordkeeping, a company asked whether it still needed to keep back-up hard copies of resale and exemption certificates that it had electronically scanned and stored. The Comptroller's prior research on the same question (an earlier internal ruling, 9305L1238A01) had concluded that hard copies should still be maintained — and the company pushed back, arguing a scanned copy contains exactly the same information as a hard copy.

The Comptroller stood by the hard-copy requirement, but with an important nuance. Citing internal Comptroller guidance (Fiche #9408L1312A12) on records requiring an original signature, the rule is: any record or certificate requiring a signature must be maintained in original or microfilmed form, so that the signature itself can be verified. The reasoning given: complete electronic-media record retention was, as of this 1999 letter, still a relatively new practice whose long-term reliability hadn't been proven for general use, and courts had recognized unalterable electronic media as acceptable evidence only in limited circumstances.

But there's a real exception buried in that answer: a scanned copy that is itself unalterable — saved as a graphic image rather than as editable/re-typeable text — is treated the same as a microfilmed copy and is acceptable on its own, without a paper back-up. The distinguishing factor isn't "electronic vs. paper" so much as "alterable vs. unalterable." Meanwhile, non-signature documents — purchase orders, invoices, and similar source documents — can be kept purely electronically as long as they contain the relevant information and are available for complete examination by Comptroller personnel; no hard-copy back-up is required for those.

What this means for you

Businesses scanning resale/exemption certificates for storage

Make sure your scanning process saves certificates as unalterable graphic images (not as OCR'd or re-typeable text) — that format is treated like microfilm and can stand on its own for audit purposes. If your system stores certificates in an editable format, keep the original signed hard copies as back-up.

Businesses storing invoices and purchase orders electronically

You're on firmer ground here — these don't require a signature, so electronic-only retention is acceptable as long as the records are complete and available for Comptroller examination.

Accountants and tax professionals advising on document-retention systems

The controlling distinction from this letter is signature-bearing records (certificates) vs. non-signature source documents (invoices, POs) — and, within signature-bearing records, alterable scans vs. unalterable graphic-image scans/microfilm. Build retention policies around that line rather than treating "electronic records" as a single category.

Common questions

Q: Do I need to keep paper copies of resale certificates if I've scanned them?
A: Only if the scan is alterable (e.g., stored as editable text). An unalterable graphic-image scan is treated like microfilm and is acceptable on its own.

Q: Does this apply to invoices and purchase orders too?
A: No — those don't require a signature, so they can be kept purely electronically as long as they're complete and available for Comptroller examination.

Q: Why does the Comptroller treat signature documents differently?
A: Because verifying a signature requires an unalterable record, and (as of this 1999 letter) the reliability of general electronic-only retention for that purpose hadn't been established, and courts had accepted unalterable electronic media only in limited circumstances.

Q: Can I rely on this letter for my own recordkeeping system today?
A: No. This opinion is based on the facts presented, and other facts, though similar, may provide a different result; it can be relied on only by the taxpayer it was issued to. Electronic recordkeeping technology and Comptroller guidance may also have evolved since 1999.

Citations and references

No numbered Tax Code section or Comptroller rule is cited by name in this letter; the Comptroller instead relies on internal prior guidance — an earlier ruling (cited as 9305L1238A01) and Comptroller Fiche #9408L1312A12 setting out recordkeeping requirements for signature-bearing documents.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9903281L

Original ruling text

March 3, 1999

Dear Mr. **:

This is in response to your request for a ruling on the following fact
situation and questions:

On February 26, 1999, I participated in a Seminar along with ** and
** from **. The purpose of this seminar was to discuss
the benefits of electronic tax filing and the records required for an audit.

I was asked by COMPANY A if it was required to maintain back-up hard copies of
resale/exemption certificates even though they have been electronically stored.
Based on my research (9305L1238A01), our position is that you should maintain
the back-up hard copies.

COMPANY A is in disagreement because the scanned copy has the same information
that a hard copy has.

Response: Fiche #9408L1312A12 sets out Comptroller requirements with regard to
records or certificates requiring an original signature. It states in part:

The Comptroller formally requires that business records be maintained in
formats that provide the following:

...

• any records or certificates requiring a signature are maintained in an
  original or microfilmed form such that the signature may be verified...

...

Because complete record retention on electronic media is a relatively new
process whose longevity has not been proven for general use and the courts have
recognized unalterable electronic media as acceptable only in limited
circumstances, the Comptroller requires the original or microfilmed documents
must be maintained as indicated above. Otherwise, electronic retention of
purchase orders, invoices, and other such documents that contains relevant
information and is available for complete examination by Comptroller personnel
is acceptable.

A microfilmed copy of a certificate provides an unalterable copy of that
document. If the scanned copy is unalterable, i.e., scanned in graphic rather
than text format, it will be acceptable.

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

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at:

Sincerely,

Gilbert Zamora
[email protected]
Tax Policy Division