Massachusetts Issues Draft Guidance on POS Transaction Recordkeeping

The Massachusetts Department of Revenue recently issued a draft directive setting out what records must be kept for all vendors, retailers, and contractors using computerized point-of-sale systems.

The purpose of the new recordkeeping and record retention guidelines is to ensure that the state can suitably verify what was sold and whether the retailer paid the proper amount of tax. These new guidelines add to the growing list of state regulations targeting POS data collection practices. Any retailers with a presence in Massachusetts may be affected by implementation of the directive and should carefully review the guidance to ensure that their POS systems conform to the requirements.

Detailed Information Required for All POS Transactions

The draft guidance requires retailers to retain enough information from POS transactions to allow the state to reconcile receipts, invoices, and other documents with the records on the retailer’s tax returns. Specifically, under the draft guidance, POS transaction records must include, at a minimum, the following information:

  • Item(s) sold
  • Price
  • Tax collected
  • Invoice number
  • Date of sale
  • Payment method
  • POS terminal number
  • POS transaction number

All of this data must be retained for at least three years, the statutory limit in Massachusetts for making additional assessments on tax returns. During the collection and retention of these records, the retailer must also maintain auditable internal controls to guarantee that the records are accurate and complete. The new Massachusetts guidelines mirror, verbatim, similar guidelines issued by the New York State Department of Taxation and Finance in 2011.

Significance

While retailers are best served by recording all transactions as accurately as possible, compliance with these updated recordkeeping and record retention requirements are necessary in Massachusetts to avoid further audits by the Department of Revenue and possible civil or criminal penalties. State law on POS data collection varies. Retailers should, therefore, remain apprised of all state data collection and recordkeeping regulations and guidelines.

The directive is currently a working draft and the Massachusetts Department of Revenue is accepting comments on the guidance through January 30, 2015.

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