35 Miss. Admin. Code Pt. I, Ch. 02 — Taxpayer Records and Document Retention

100 Definitions
101 "Commissioner" means the Commissioner of the Mississippi Department of Revenue.
102 "Department" means the Mississippi Department of Revenue
103 "Designated representative" means an individual, business, private service provider or
employee who represents a taxpayer in the preparation and/or maintenance of records as
provided in the regulation.
104 "Person" means a natural person, partnership, limited partnership, corporation, limited
liability company, estate, trust, association, joint venture, other legal entity or other
group or combination acting as a unit, and includes the plural as well as the singular in
number.
105 "Records" means written and/or computerized documentation that pertains to a person's
financial affairs in which transactions are entered and summarized, including but not
limited to, assets and liabilities, monetary transactions, contracts, or loans.
106 "Source Document" means the original records containing the key details of a
transaction, including its date, purpose, and amount. Source documents provide
documentary evidence or proof that a transaction occurred and are critical to verify and
support the information provided on a tax return. Typical source documents include, but
are not limited to, wage and tax statements, sales invoices, purchase invoices, and
canceled checks.
200 General
201 The purpose of this regulation is to outline the general requirements imposed on every
taxpayer to prepare and retain all records necessary to determine the correct tax liability
with respect to taxes administered by the Department of Revenue. These requirements
are imposed on all taxpayers without regard to whether they use paper, computer, or
electronic processes, systems, or technology.
202 Every taxpayer and every designated representative, if applicable, is required to keep
accurate, complete , and legible records. Records should be adequate to provide
reasonable assurance that all taxable transactions and income are properly identified and
recorded. Records must be supported by source documents. In addition:

# 1.

Records must be kept in good order and condition. Each source document
should have a unique identifier, usually a number or alphanumeric code. Pre-
numbering of commonly used forms, such as sales invoices, helps to classify
transactions and to identify and locate missing source documents.

# 2.

Records including financial statements, reports, and any information used to
prepare a tax return must be supported by source documents that verify and confirm the
income, expenses, and credits reported on tax returns and financial statements.

# 3.

Records must be written in English.

# 4.

Source documents such as bills, receipts, checks, invoices, and cash register
tapes must include the transaction date whether printed on paper or created and
maintained in an electronic format.

# 5.

Records and source documents must be available for review by the Department
upon request.

# 6.

For business taxpayers, the records must be kept at the place of business. If the
principal place of business is outside Mississippi, the records of the taxpayer
may be kept at their principal place of business.
203 A taxpayer or his designated representative, if applicable, should keep separate business
and personal records with transactions clearly identified as business or personal. If a
taxpayer owns multiple businesses, the records for each business must be kept separate.
204 If a taxpayer makes deposits or transfers of non -business income or money into a
business account, sufficient documentation must be maintained to support the source of
those funds. If the non-business funds were a loan, maintain a copy of the signed loan
instrument that shows the lender's name, date, and amount of the loan. If the non -
business funds were a transfer from a personal account or another business account, or if
the funds were a refund, rebate, or similar, maintain documentation to support the
source of that money, including but not limited to canceled checks and deposit slips.
205 Records may be considered inadequate if:
1. There are missing, lost, or incomplete documents or records, and/or the records
are not in a form that the Department can audit.
2. The taxpayer or his designated agent, if applicable, failed or refused to
provide records to the Department.
3. The records do not clearly demonstrate receipts or transactions to a degree
necessary to determine the amount of tax which the taxpayer is liable for.
4. The records do not substantiate the taxable status of purchases and/or show that
a business's purchases correlate to business activity.
206 If adequate records necessary to determine the tax due are not kept, or if an audit of the
records of a taxpayer, or any return filed by him, or any other information discloses that
taxes are due and unpaid, the Commissioner may take actions that include, but are not
limited to:
1. Disallowing exemptions, credits, or reduced rates of tax.
2. Making assessments of due and unpaid taxes.
3. Suspending or revoking permits.
207 In most cases, records are to be maintained no less than three (3) years from the date the
return was filed. There are instances when records should be kept for longer periods,
such as:
1. If a notice of assessment or denial of refund has been issued to the taxpayer by
the Department and the taxpayer files an appeal, the records for the periods
covered by the notice of the assessment or denial of refund must be preserved
and retained until the issue has been resolved.
2. Maintaining records that will be needed to complete a future return, such as
when the records have information related to a net operating loss or net casualty
loss.
3. A return has been subject to a federal audit.
208 Examples of records to maintain include, but are not limited to, the following:
1. General ledgers, sales journals, purchase order books, cash receipts books,
and cash disbursement books.
2. Canceled checks, bank statements, sales contracts, and purchase invoices.
3. Profit and loss statements and balance sheets.
4. State tax returns and reports, including all schedules or work papers used in the
preparation of tax reports or returns.
5. Copies of federal income tax returns filed with the Internal Revenue Service
including all work papers, schedules, and similar records.
6. Tax filings with other states including all work papers, schedules, and similar
records.

# 7.

Records of loans, services, other non -sales transactions, and any non -business
income.

# 8.

Any other records necessary to establish income, deductions, credits, expenses,
accounting methods, or other information utilized in determining the Mississippi
tax liability.

# 9.

Digital payment records, e.g., Cash App, PayPal, and Venmo.
209 The requirements contained in this regulation are not to be construed as an exclusive list
for each person. Record keeping and retention requirements will vary by tax type,
business type, and on an individual basis.
210 (Reserved)
35.I.02 revised effective December 21, 2024