Recordkeeping requirements on exempt sales less than ten cents

Sec. 11. (a) In order to minimize the taxpayer's recordkeeping requirements, the department has prescribed a formula for determining the

retail merchant's "income exclusion ration" for a tax year.

(1) The retail merchant may determine the ration of 1¢ to 9¢ sales to total sales from actual records of sales during a

period of fifteen consecutive days during the first quarter of the calendar year. However, the period of time may be changed if the change is requested

by the retail merchant because of his peculiar accounting procedures or marketing factors.

(2) If a merchant has multiple selling locations or different kinds of selling transactions, the merchant may apply in advance to the

Indiana department of revenue for permission to use a "representative sampling of locations" at which such checks are to be made. Sufficient

information to establish the fact that such locations will be "representative" of all locations will be required.

(3) The merchant using the sampling method must keep an accurate record of the dollar amount of unitary transactions under ten cents

(10¢) during this fifteen day period. By dividing this total amount of gross sales at the locations used for the fifteen day period, a percentage

can be determined which the merchant may apply against gross sales to establish "sales not subject to the tax". This percentage factor is used

throughout the balance of the calendar year in which the sampling is made.

–EXAMPLE–

(A) Gross sales for 15 consecutive days during first quarter $2500.00

(B) Sales of 1¢ to 9¢ during same period 150.00

(C) $150.00 divided by $2500.00 6%

Accordingly, the merchant would deduct 6% of gross receipts as nontaxable 1¢ to 9¢ sales on line "D" of his sales and

use tax reporting form ST-103.

(b) It is important that the percentage factor be arrived at from the merchant's actual records. These records must be maintained for four

(4) years because the merchant will be required to substantiate the percentage factor used upon the request of the department.