701—254.4(453A) Records. Every taxpayer subject to the provisions of Iowa Code chapter 453A shall keep, preserve, and make available to the department records for a period of three years. The following is a list of records subject to the provisions of this rule. For taxpayers using an electronic data interchange process or technology, also see 701—subrule 11.4(4).
	254.4(1) Cigarette manufacturer. Licensed cigarette manufacturers are required to keep the following records.
	a. 	Records, including invoices, showing the sale of cigarettes in Iowa or the sale of cigarettes for shipment into Iowa.
	b. 	Records evidencing the transportation of cigarettes into Iowa.
	c. 	Records, including invoices, showing all sales of cigarettes to licensees.
	d. 	A record of all stamps purchased.
	e. 	Copies of all reports filed with the department.
Unlicensed cigarette manufacturers shipping cigarettes into Iowa are asked to keep records, including invoices, showing the sale of cigarettes in Iowa or the sale of cigarettes for shipment into Iowa.
Nothing in this rule shall be construed to affect the provisions of P.L. 95-575 (Contraband Cigarette Act, 18 U.S.C. Ch.	114) or P.L. 81-363 (Jenkins Act, 15 U.S.C., Sec.	375).
	254.4(2) Cigarette distributing agent.
	a. 	Records of the receipt of all cigarettes showing the amount of cigarettes received and from whom received.
	b. 	Records of all distribution of cigarettes showing the amount of cigarettes shipped, to whom and at whose direction the cigarettes were distributed.
	c. 	Records showing all exports of cigarettes.
	d. 	Copies of all reports filed with the department.
	e. 	Detailed inventory records.
	f. 	Freight receiving and shipping records.
	254.4(3) Cigarette distributors.
	a. 	Records, including invoices, showing the purchase of all cigarettes sold, used or stored in Iowa.
	b. 	Records, including invoices, showing the sale of cigarettes in Iowa.
	c. 	Detailed inventory records.
	d. 	Freight receiving and shipping records.
	e. 	A record of all stamps purchased.
	f. 	Copies of all reports filed with the department.
	254.4(4) Wholesaler.
	a. 	Records, including invoices, evidencing the purchase of all cigarettes.
	b. 	Records, including invoices, evidencing the sale of all cigarettes.
	c. 	Detailed inventory records.
	254.4(5) Cigarette vendor.
	a. 	Records, including invoices, evidencing the purchase of all cigarettes.
	b. 	Records evidencing the sale of cigarettes.
	c. 	Inventory records.
	d. 	Records of all cigarette vending machines owned, furnished, installed, serviced, operated or maintained by the vendor and the location of each.
	254.4(6) Cigarette retailer.
	a. 	Records, including invoices, evidencing the purchase of all cigarettes.
	b. 	Inventory records.
	254.4(7) Tobacco distributor. The same records as a cigarette distributor but with respect to tobacco, excluding records of stamps purchased. (See 254.4(3))
	254.4(8) Tobacco subjobber. The same records as a cigarette wholesaler but with respect to tobacco.
	254.4(9) Tobacco retailer. The same records as a cigarette retailer but with respect to tobacco.
	254.4(10) Common carrier engaged in transporting cigarettes or tobacco products into Iowa.
	a. 	Copies of bills of lading or manifests as to each transportation of cigarettes or tobacco.
	b. 	Log book or trip sheets.
	254.4(11) Microfilm and related records system. Microfilm, microfiche, COM (computer on machine) and other related reduction in storage systems will be referred to as “microfilm” in this rule.
Microfilm reproductions of general books of account, such as a cash book, journals, voucher registers, ledgers, etc., are not acceptable other than those that have been approved by the Internal Revenue Service under Revenue Procedure 76-43, Section 302. However, microfilm reproductions of supporting records of detail, such as sales invoices, purchase invoices, credit memoranda, etc., may be allowed providing all the following conditions are met and accepted by the taxpayer.
	a. 	Appropriate facilities are provided to ensure the preservation and readability of the films.
	b. 	Microfilm rolls are indexed, cross-referenced, labeled to show beginning and ending numbers or beginning and ending alphabetical listing of documents included, and are systematically filed.
	c. 	The taxpayer agrees to provide transcripts of any information contained on microfilm which may be required for purposes of verification of tax liability.
	d. 	Proper facilities are provided for the ready inspection and location of the particular records, including modern projectors for viewing and for the copying of records.
	e. 	Any audit of “detail” on microfilm may be subject to sample audit procedures, to be determined at the discretion of the director or the director’s designated representative.
	f. 	A posting reference must be on each invoice.
	g. 	Credit memoranda must carry a reference to the document evidencing the original transaction.
	h. 	Documents necessary to support claimed exemptions from tax liability, such as bills of lading and purchase orders, must be maintained in an order by which they readily can be related to the transaction for which exemption is sought.
	254.4(12) Automatic data processing records. Automatic data processing is defined in this rule as including electronic data processing (EDP) and will be referred to as ADP.
	a. 	An ADP tax accounting system must have built into its program a method of producing visible and legible records which will provide the necessary information for verification of the taxpayer’s tax liability.
	b. 	ADP records must provide an opportunity to trace any transaction back to the original source or forwarded to a final total. If detail printouts are not made of transactions at the time they are processed, then the system must have the ability to reconstruct these transactions.
	c. 	A general ledger with source references will be produced as hard copy to coincide with financial reports of tax reporting periods. In cases where subsidiary ledgers are used to support the general ledger accounts, the subsidiary ledgers should also be produced periodically.
	d. 	Supporting documents and audit trail. The audit trail should be designed so that the details underlying the summary accounting data may be identified and made available to the director or the director’s designated representative upon request. The system should be so designed that the supporting documents, such as sales invoices, purchase invoices, credit memoranda, etc., are readily available. (An audit trail is defined as the condition of having sufficient documentary evidence to trace an item from source (invoice, check, etc.) to a financial statement or tax return; or the reverse; that is, to have an auditable system.)
	e. 	Program documentation. A description of the ADP portion of the accounting program should be available. The statements and illustrations as to the scope of operations should be sufficiently detailed to indicate:
	(1)	The application being performed;
	(2)	The procedure employed in each application (which, for example, might be supported by flow charts, block diagrams or other satisfactory description of the input or output procedures); and
	(3)	The controls used to ensure accurate and reliable processing. Program and systems changes, together with their effective dates should be noted in order to preserve an accurate chronological record.
	f. 	Storage of ADP output will be in appropriate facilities to ensure preservation and readability of output.
	254.4(13) General requirements. If a tax liability has been assessed and an appeal is pending to the department, district court or an appellate court, books, papers, records, memoranda or documents specified in this rule that relate to the period covered by the assessment shall be preserved until the final disposition of the appeal.
The records will be considered inadequate when the requirements of this rule are not met. The director may, by express order in certain cases, authorize permit holders to keep their records in a manner and upon forms other than those so prescribed (agreements must be in writing).
	254.4(14) Other persons. The director may require any person other than those previously listed in this rule to maintain books and records as deemed necessary by the director.
This rule is intended to implement Iowa Code sections 453A.15 and 453A.45 as amended by 2004 Iowa Acts, Senate File 2296, and Iowa Code sections 453A.18, 453A.19, 453A.24, and 453A.49.
[ARC 2657C, IAB 8/3/16, effective 9/7/16; ARC 6508C, IAB 9/7/22, effective 10/12/22; Editorial change: IAC Supplement 10/18/23]