New Jersey Recordkeeping Rules Proposed
The New Jersey Division of Taxation has proposed new rules to clarify a Corporation’s recordkeeping requirements under state tax laws. The proposal would provide that corporations are required to maintain all records used to determine their Corporation Business Tax liability and such other records as the Director of the Division of Taxation may require. The proposed rule would also require that corporations that are required to collect Sales and Use Tax keep records of every purchase and sale, including contemporaneous sales records, such as cash register tapes and journals, sales slips, invoices, receipts or memoranda of price.
The proposed rule would clarify that corporations operating primarily on a cash basis and dealing primarily in cash purchases and sales, including but not limited to family owned corporate restaurant businesses, must maintain sufficient records for the determination of the corporation’s tax liabilities If a corporation does not maintain records adequate to classify the corporation’s income for purposes of establishing tax liabilities, the Division may, under the proposal, make an audit determination that certain amounts of income have been distributed to shareholders of the corporation, in the form of salary or dividends.
Amounts that cannot be identified as arising from some aspect of the operations of the business will first be deemed to have been distributed to the shareholders as salary and includable in the income of the shareholders. Amounts beyond salary will be deemed to have been distributed to the shareholders as a dividend, and includable in the income of the shareholders. The Division will utilize commonly accepted accounting audit practices to make these determinations.