KRS 131.240 — Taxpayer's records in electronic format -- Requirements -- Satisfaction of requirements

(1) If a taxpayer's required records are maintained as both electronic records and hard
copies, the taxpayer shall make the records available to the department in electronic
record format upon the department's request and in accordance with the following:
(a) Electronic records used to establish tax compliance shall contain sufficient
information so that the details underlying the electronic record can be
identified and made available to the department upon request;
(b) Taxpayers shall not be required to construct electronic records for tax
purposes other than those created in the course of business;
(c) If a taxpayer uses codes to identify some element in an electr onic record or
hard copy, the taxpayer shall provide the department with a method to
interpret the coded information; and
(d) The taxpayer's computer hardware or software shall accommodate the
extraction and conversion of retained electronic records.
(2) A taxpayer may create electronic records solely for the department's use if the
taxpayer documents the process that created the record and the relationship between
the electronic record and the original record.
(3) Nothing in this section shall relieve taxp ayers of the responsibility to retain hard -
copy records that are created or received in the ordinary course of business as
required by existing law.
(4) Nothing in this section shall prevent the department from requesting, in lieu of
electronic records, any hard-copy printouts that the taxpayer possesses at the time of
examination.
(5) The department's access to electronic records as required in subsection (1) of this
section may be satisfied by:
(a) The taxpayer providing the department with the hardware, software, and
personnel resources to access the electronic records;
(b) The taxpayer arranging for a third party to provide the hardware, software, and
personnel resources necessary to access the electronic records. Contracting
with a third party does not relieve the taxpayer of its responsibilities under this
section; or
(c) The taxpayer converting the electronic records to a standard record format
specified by the department, including copies of files, on a medium to which
the department agrees.