Auditing Taxpayer Records

14b.1. Taxpayer records may be audited by authorized representatives of the Tax Commissioner at any time during regular business hours of the taxpayer at the discretion of the Tax Commissioner or his authorized agent or representative. Any person who maintains such records outside this State shall make such records available for audit where the general records of the taxpayer are kept.

14b.2. The Tax Commissioner may use a detailed auditing procedure or a sample and projection auditing method to determine tax liability.

14b.3. A sample and projection auditing method is appropriate if:

14b.3.1. the taxpayer's records are so detailed, complex, or voluminous that an audit of all detailed records would be impractical or unreasonable;

14b.3.2. the taxpayer's records are inadequate or insufficient, so that a competent audit for the period in question is not otherwise possible; or

14b.3.3. the cost of an audit of all detailed records to the taxpayer or the State will be unreasonable in relation to the benefits derived, and sampling procedures will produce a reasonable result.

14b.4. If records are inadequate to accurately reflect the business operations of the taxpayer, the auditor will determine the best information available and will base the audit report on that information.

14b.5. Exemption certificates and material purchase certificates.

14b.5.1. Exemption certificates and material purchase certificates should be available at the time of the audit. Certificates acquired by the taxpayer after the audit begins are subject to independent verification of issuance by the purchaser before the deductions will be allowed in an audit.

14b.5.2. If the taxpayer is not in possession of the certificates within sixty (60) days from the date written notice is given by the Tax Commissioner that certificates pertaining to periods or transactions specified in the notice are required, any deductions claimed which require exemption or material purchase certificates will be disallowed. Exemptions claimed by those certificates acquired during this sixty (60) day period will be subject to independent verification of issuance by the purchaser before the deductions will be allowed. Certificates presented after the sixty (60) day period will not be accepted.

14b.6. Both vendors and vendees are subject to audit and to assessment.

14b.6.1. Vendors will be assessed for any consumers sales or use taxes which that they should have collected but failed to collect from the vendee. A vendor is relieved from this liability only if the vendor has in good faith taken the vendee's direct pay permit number, an exemption certificate or a material purchase certificate number or has notified the Tax Commissioner of a refusal to pay tax or provide indicia of tax exemption in accordance with Section 6.1.1.2 of these regulations.

14b.6.2. Vendees will be assessed consumers sales or use taxes which they should have paid to their vendors or remitted directly to the Tax Commissioner. A vendee is relieved from this liability only if he paid the consumers sales or use tax due on the transaction to the vendor or directly to the Tax Commissioner. If exemption from tax was claimed, the vendee must be able to verify that the tangible personal property or service purchased without paying tax to the vendor or directly to the Tax Commissioner was in fact used for an exempt purpose or used in an exempt manner.

14b.7. The Tax Commissioner may proceed against either the vendor or the vendee, or against both for delinquent tax until the amount of the tax, additions to tax, penalties and interest have been paid.