What Records Should a Business Keep for Sales Tax?

New York State requires businesses registered for sales tax to maintain records that support the amounts reported on their sales tax returns. These records must be kept for at least three years — and in some cases longer — and must be made available to the state if the business is audited.

Good sales tax recordkeeping is not just about compliance. It also makes filing easier, reduces the time spent preparing returns, and provides clear documentation if questions arise.

Sales Records

For every sale, the business should be able to document:

• The date of the sale
• The amount of the sale
• Whether sales tax was collected, and how much
• Whether the sale was exempt, and the basis for the exemption

This documentation typically comes from sales receipts, invoices, point-of-sale system records, or order records. The format matters less than the completeness — the records need to support what was reported on the return.

Exempt Sale Documentation

If you make sales that are exempt from sales tax — sales to resellers, sales of exempt items, sales to exempt organizations — you need documentation to support those exemptions. For sales to resellers, this means obtaining and retaining a valid resale certificate (Form ST-120) from the buyer.

Without proper exemption documentation, the state can treat those sales as taxable during an audit — even if they were genuinely exempt.

Purchase Records

Records of purchases are also relevant for sales tax purposes, particularly for businesses that purchase items for resale or that claim exemptions on purchases used in the business. Keep invoices and receipts for all business purchases, noting whether sales tax was paid or whether an exemption was claimed.

Sales Tax Returns and Payment Records

Keep copies of all filed sales tax returns and records of all sales tax payments made to the state. These records confirm that returns were filed and payments were made on time, and provide a baseline for any audit.

How Long to Keep Records

New York generally requires sales tax records to be kept for at least three years from the due date of the return or the date it was filed, whichever is later. However:

• If a return was not filed, the statute of limitations does not begin to run — records should be kept indefinitely in that case
• If fraud is involved, there is no statute of limitations
• Records related to capital assets used in the business may need to be kept longer

A conservative approach is to keep sales tax records for at least five to seven years.