HAR §18-231-14.20. (Reserved

) §18-231-3-14.21 Scope of recordkeeping rules. Sections 18-231-3-14.22 to 18-231-3-14.25 apply to every person liable for a tax imposed by chapter 237, 237D, 238, 243, 244D, 245, or 251, HRS. [Eff 8/18/94] (Auth: HRS §§231-3(9)) (Imp: HRS §§237-41, 237D-12, 238-9, 243-9, 244D-9, 245-8, 251-11) §18-231-3-14.22 General recordkeeping requirements.  (a) Every person who: (1) Does business (within the meaning of section 237-2, HRS) in this State; (2) Imports tangible personal property for use, sale, or consumption in this State; or (3) Purchases tangible personal property for use, sale, or consumption in this State from a seller that is not licensed under chapter 237, HRS, shall keep complete and adequate records from which the department may determine any tax for which that person may be liable. (b) Unless the department authorizes an alternative method of recordkeeping in writing, these records shall show: (1) Gross receipts from all activities engaged in or caused to be engaged in with the object of gain or economic benefit either direct or indirect, including the fair market value of property or services received in barter or exchange transactions, whether the receipts are claimed to be taxable or nontaxable. (2) The amounts of all deductions, exemptions, or credits claimed in filing any tax return. HRS §231-3(14) HRS §231-3(14) HRS §231-3(14) ADMINISTRATION OF TAXES §18-231-3-14.24 231- 7 (Unofficial Compilation as of 12/31/2025) (3) Total value, as defined in section 18-238-2(g)(2), of all tangible personal property purchased for sale, consumption, or lease in this State. (c) The records shall include: (1) The normal books of account ordinarily maintained by the prudent business person in the line or lines of business in which the person is engaged; (2) All bills, receipts, invoices, cash register tapes, or other documents of original entry supporting the entries in the books of account; (3) All schedules or working papers used in preparation of tax returns; and (4) Any records that may be required under any specific tax chapter to which the taxpayer may be subject (such as those described in sections 243-9, 244D-9, or 245-8, HRS). [Eff 8/18/94] (Auth: HRS §§231-3(9)) (Imp: HRS §§237-41, 237D-12, 238-9, 243-9, 244D-9, 245-8, 251- 11) §18-231-3-14.23 Microfilm, microfiche, and similar records. Records, including general books of account, such as cash books, journals, voucher registers, ledgers, and like documents may be maintained by microfilm, microfiche, computer imaging, or another method approved by the department in writing, if the following requirements are satisfied: (1) Appropriate facilities shall be provided for preservation of the films or media for the periods required; (2) Microfilm rolls, fiche, or other approved media shall be systematically filed, indexed, cross- referenced and labeled to show beginning and ending numbers or to show beginning and ending alphabetical listing of documents included; (3) Taxpayer shall make available upon request of the department, at the examination site or other mutually agreeable location, facilities for the ready inspection and location of particular records, such as a reader, printer, projector, or terminal in good working order for viewing and copying the records; (4) Taxpayer shall set forth in writing the procedures governing the establishment of its data storage and retrieval system and the individuals who are responsible for maintaining and operating the system with appropriate authorization from the corporate board of directors, general partners, or owners; (5) The data storage and retrieval system shall be complete and shall be used consistently in the regular conduct of the business; (6) Taxpayer shall establish procedures with appropriate documentation so that an original document can be traced through the data storage and retrieval system; (7) Taxpayer shall establish internal procedures for inspection and quality assurance of the data storage and retrieval system; (8) Taxpayers shall be responsible for the effective identification, processing, storage, and preservation of microfilm, microfiche, or other approved media, making the media readily available for inspection or testing by the department as long as the contents may become material in the administration of any state tax law; (9) Taxpayer shall keep a record identifying where, when, by whom, and on what equipment the microfilm, microfiche, or other approved media was produced; (10) The material displayed, or reproduced on paper, by the data retrieval equipment shall exhibit a high degree of legibility and readability, where legible means the quality of a letter or numeral that enables the observer to identify it positively and quickly to the exclusion of all other letters or numerals, and readability means the quality of a group of letters or numerals being recognizable as words or complete numbers; and (11) The data storage and retrieval system, including processing duplication, quality control, storage, identification, and inspection shall meet industry standards as set forth by the American National Standards Institute, National Micrographics Association, or National Bureau of Standards. [Eff 8/18/94] (Auth: HRS §§231-3(9)) (Imp: HRS §§237-41, 237D-12, 238-9, 243-9, 244D-9, 245-8, 251-11) §18-231-3-14.24 Records prepared by automated data processing systems.  (a) An automatic data processing (ADP) tax accounting system may be used to provide the records required to verify tax liability. All ADP systems used for this purpose shall include a method of producing legible and readable records to verify tax liability, reporting, and payment. The following requirements apply to any taxpayer maintaining records on an ADP system: (1) The ADP system shall be able to trace any transaction back to the original source or forward to a final total. If detailed printouts are not made of transactions at the time they are HRS §231-3(14) HRS §231-3(14) §18-231-3-14.25 ADMINISTRATION OF TAXES 231- 8 (Unofficial Compilation as of 12/31/2025) processed, the system shall have the ability to reconstruct these transactions. The system shall be made available upon request to the department for inspection and testing. (2) A general ledger, with source references, shall be prepared to coincide with financial reports for tax reporting periods. Where subsidiary ledgers are used to support the general ledger accounts, the subsidiary ledgers also shall be prepared. (3) The audit trail shall be designed so that the details underlying the summary accounting data may be identified and made available to the department upon request. The system shall be designed so that supporting documents, such as sales invoices, purchase invoices, and credit memoranda, are readily available. (4) A description of the ADP portion of the accounting system shall be made available to the department upon request. The statements and illustrations as to the scope of operations shall be sufficiently detailed to indicate: (A) The application being performed; (B) The procedures employed in each application, which may be supported by flow charts, block diagrams, or other reasonable description of the input or output procedures; and (C) The controls used to ensure accurate and reliable processing. Changes in the ADP system, together with their effective dates, shall be noted. (5) Adequate record retention facilities shall be used for storing tax information, printouts, and all supporting documents required by law. (b) Compliance with standards promulgated by the Internal Revenue Service for ADP systems to be in compliance with section 6001 (with respect to records required to be kept by every person subject to any federal tax) of the Internal Revenue Code of 1986, as amended (such as Rev. Proc. 91-59, 1991-2 C.B. 841) shall be considered sufficient to comply with this section. [Eff 8/18/94] (Auth: HRS §§231-3(9)) (Imp: HRS §§237-41, 237D-12, 238-9, 243-9, 244D-9, 245-8, 251-11) §18-231-3-14.25 Records to be preserved for three years; penalties for failure to maintain records.  (a) The records described in section 18-231-3-14.22 shall be kept in the English language and preserved within the State for a period of not less than three years, and shall be kept and preserved for a longer period if so provided by statute. The records relating to any tax for a taxable period shall be preserved during the statutory period within which the tax may be assessed or levied, including any extensions of the statutory period agreed to between the department and the taxpayer. (b) Those records shall be made available for examination on request by the department or the Multistate Tax Commission, or the authorized representatives of either. (c) Upon failure by the taxpayer, without reasonable cause, to substantially comply with the requirements of sections 18-231-3-14.22 to 18-231-3-14.25, the department may: (1) Disregard any records that have not been prepared and maintained in substantial compliance with the requirements of these rules; (2) Treat the noncompliance with these rules as evidence of negligence or intent to evade the payment of taxes; and (3) Revoke a taxpayer’s general excise license, or certificate of registration, upon evidence of continued failure to comply with these rules. [Eff 8/18/94] (Auth: HRS §§231-3(9)) (Imp: HRS §§237-41, 237D-12, 238-9, 243-9, 244D-9, 245-8, 251-11) §18-231-3-14.26 Registration of representatives.  The department may require all persons who represent a taxpayer in any capacity before the department to register in the manner prescribed by the department. [Eff 3/17/2018] (Auth: HRS §§231-3(9)) (Imp: HRS §§231-3(14)) §18-231-3.4-01 Cost recovery fees for published reports.  (a) The department shall charge cost recovery fees to any person requesting to receive a copy of a published report from the department. (b) The department may waive the fee imposed under this section in cases of hardship as defined by section 18-231-25.5-01(g) and determined by all relevant facts and circumstances. (c) For the purposes of this section “published report” means a report on: (1) Hawaii income patterns for individuals, corporations, proprietorships, or partnerships; or (2) Tax credits prepared by the department’s Tax Research and Planning Office. A published report may be in electronic forms defined by section 18-231-25.5-01 or any other physical form. (d) The fee amounts charged under this section shall be determined by those amounts actually charged to and incurred by the department for the production and distribution of each published report. Each fee charged under HRS §231-3(14) HRS §231-3(14) HRS §231-3.4 ADMINISTRATION OF TAXES §18-231-9.4-06 231- 9 (Unofficial Compilation as of 12/31/2025) this section shall be separately imposed and more than one fee may apply. [Eff 3/03/97] (Auth: HRS §§231-3(9), 231- 3.4(b)(1)) (Imp: HRS §231-3.4(b)(1), (Act 250, Section 2, SLH 1996)) §18-231-4 to