Books and Records Penalties

TITLE 86: REVENUE CHAPTER I: DEPARTMENT OF REVENUE PART 440 CIGARETTE TAX ACT SECTION 440.115 BOOKS AND RECORDS PENALTIES Section 440.115  Books and Records Penalties a) Any person required by the Act to keep records of any kind whatsoever, who shall fail to keep the records so required or who shall falsify such records, shall be guilty of a Class 4 felony.  If a person fails to produce the records for inspection by the Department upon request, a prima facie presumption shall arise that the person has failed to keep the records so required.  A person who is unable to rebut this presumption is in violation of the Act and is subject to the penalties provided in this subsection (a).  [35 ILCS 130/14] b) Any person who shall fail to safely maintain and preserve the records required by Sections 11, 11a, 11b, and 11c of the Act for a period of 3 years, as required in the Act , in such manner as to ensure permanency and accessibility for inspection by the Department, shall be guilty of a business offense and may be fined up to $5,000. [35 ILCS 130/15]  See Section 440.110. c) Any person who fails to keep books and records or fails to produce books and records for inspection, as required by Sections 11, 11a, 11b, and 11c of the Act, is liable to pay to the Department, for deposit in the Tax Compliance and Administration Fund, a penalty of $1,000 for the first failure to keep books and records or failure to produce books and records for inspection, as required by Sections 11, 11a, 11b, and 11c, and $3,000 for each subsequent failure to keep books and records or failure to produce books and records for inspection, as required by Sections 11, 11a, 11b, and 11c. [35 ILCS 130/15a]  See Section 440.110. 1)         All books and records and other papers and documents that are required to be kept by the Act shall, at all times during the usual business hours of the day, be subject to inspection by the Department or its duly authorized agents and employees.  A person that prohibits a duly authorized agent of the Department from inspecting books and records during usual business hours of the day has failed to produce books and records to the Department for inspection as required by this Section.  The Department may issue a notice of penalty to that person pursuant to this subsection (c).  The Department is not required to provide the retailer with a written document request pursuant to this subsection (c)(1) or provide additional time for the retailer to allow the inspection of the premises and the books and records at the location. 2)         Except for retailers that are permitted to maintain books and records at another location pursuant to Section 440.110(d), distributors, secondary distributors, manufacturers with manufacturer representatives, and retailers must have a person at their place of business at all times during the usual business hours of the day who is authorized to produce books and records for inspection by the Department.  It is presumed that a person working at a place of business has authority to permit the Department to inspect the books and records at the business location.  If a retail establishment has only one employee working at the time of the request for the books and records who has no ownership interest in the establishment and is not authorized to produce books and records, the employee is required to advise the Department they do not have authority to provide books and records for inspection.  The Department will not issue a notice of penalty to a retailer for failure to produce books and records if a person who is authorized to produce the books and records can be contacted by the employee and arrives at the place of business within 2 hours and produces the books and records.  The Department may extend the period either on verbal or written request for good cause shown. EXAMPLE 1:  An authorized agent of the Department attempts to inspect the books and records of a cigarette retailer.  The person at the store states the books and records are at the store but refuses to provide access to the books and records because the owner of the store told the employee not to let anyone have access to the records.  The person states the owner is unavailable and cannot be contacted.  The Department will issue a notice of penalty. EXAMPLE 2:  An authorized agent of the Department attempts to inspect the books and records of a cigarette retailer.  The person at the store states the books and records are at the store but refuses to provide access to the books and records because the owner of the store told the employee not to let anyone have access to the records.  The person offers to call a person responsible for making the records available to the agent.  The employee calls the person, and the person arrives at the store in less than 2 hours and makes the books and records available to the agent.  The Department will not issue a notice of penalty. EXAMPLE 3:  An authorized agent of the Department enters a retailer's place of business and requests to see the books and records.  The person at the store states the books and records are maintained at another business location in Illinois.  The agent cannot issue a notice of penalty unless the retailer failed to notify the Department that the books and records are located at another location pursuant to Section 440.110(d).  However, the authorized agent of the Department does have authority to inspect the premises pursuant to subsection Section 440.110(e)(2) and (3). 3)         If a person fails to produce books and records for inspection by the Department upon request, a prima facie presumption shall arise that the person has failed to keep the books and records so required.  A person who is unable to rebut this presumption is subject to the penalty provided in this subsection (c).  Except as otherwise provided by subsection (c)(1), if a request for the production of books and records has been made and not honored, prior to issuing a notice of penalty for a failure to maintain books and records or a failure to produce books and records, the Department must provide the taxpayer with a document request in writing.  The written document request shall contain: A)        the name of the person receiving the request; B)        the name of the business; C)        the date of the original request or requests; D)        the books and records requested; E)        the books and records that the person failed to produce; F)         the number of days the person has to produce the books and records; and G)        the name of the Department agent or employee and their contact information. 4)         The Department agent or employee shall sign and date the written document request and personally provide or mail a copy of the written document request to the business at its last known address.  The person shall have 30 days from the date of the written document request to produce the books and records the person has failed to produce.  The Department may extend the period either on written request for good cause shown or on its own motion.  If the person fails to produce the books and records within the time allotted, the Department may issue a notice of penalty pursuant to this subsection (c) to the business at its last known address. EXAMPLE:  An authorized agent of the Department enters a convenience store and requests to see all the invoices for cigarettes purchased by the store in the last 60 days and all cash register receipts for sales made in the last 60 days.  The person at the store produces the cash register receipts but states that they have no invoices for cigarettes purchased in the last 60 days.  The agent completes a written document request, provides a copy to the person, and provides the person 30 days to produce the invoices.  The agent returns 30 days later and requests the invoices.  The person at the store cannot produce the invoices.  The Department will issue a notice of penalty to the business at its last known address. 5)         Any person receiving a notice of penalty may, within 20 days after the date on the notice, protest and request a hearing.  Upon receiving a request for a hearing, the Department shall give notice to the person requesting the hearing of the time and place fixed for the hearing and shall hold a hearing in conformity with the provisions of the Act and then issue its final administrative decision in the matter to that person.  If the request is made during an audit, the Department shall postpone the hearing until completion of the audit or inspection.  In the absence of a protest and request for a hearing within 20 days, the Department's decision shall become final without any further determination being made or notice given. 6)         The Department cannot impose more than one penalty for failure to produce books and records for a calendar month. EXAMPLE 1:  An authorized agent of the Department inspects a cigarette retailer and requests the records for the first week in April.  The retailer does not produce the records.  The agent subsequently requests the records for the remaining 3 weeks in April.  The retailer does not produce the records.  The agent can assess only one penalty for the month of April. EXAMPLE 2:  An authorized agent of the Department inspects a cigarette retailer and requests all purchase invoices for cigarettes for March.  The invoices are not provided by the retailer and the Department issues a notice of penalty.  The agent returns in May and asks to see all the cigarette sales receipts for March.  The retailer fails to produce the sales receipts for March.  The Department cannot issue a penalty for failure of the retailer to provide sales receipts for March because the agent has previously issued a notice of penalty for failure to produce the invoices for March. 7)         A records request can cover multiple periods.  The Department is authorized to issue a separate penalty for each period.  For example, for a taxpayer that files a return monthly, the period is one month. EXAMPLE:  An authorized agent of the Department inspects a cigarette retailer and requests the books and records for the months of January through July.  The retailer cannot produce the books and records for any of the months.  The agent fills out a written document request, provides a copy of the document request to the person, and provides the person 30 business days to produce the invoices.  The agent returns 30 business days later and requests the invoices.  The person at the store cannot produce the invoices.  The Department will issue a notice of penalty in the amount of $1,000 for the month of January and $3,000 for each of the months February through July, for a total penalty of $19,000. d) The Department may, after notice and hearing as provided for by the Act, revoke, cancel or suspend the license of any distributor, secondary distributor, or retailer for any noncompliance with this Section. e) Any distributor, secondary distributor, or retailer aggrieved by any decision of the Department under this Section may, within 20 days after notice of the decision, protest and request a hearing.  Upon receiving a request for a hearing, the Department shall give notice in writing to the distributor, secondary distributor, or retailer requesting the hearing stating the time and place fixed for the hearing and containing a statement of the charges preferred against the distributor, secondary distributor , or retailer.  The Department shall hold the hearing in conformity with the provisions of the Act and then issue its final administrative decision in the matter to the distributor, secondary distributor, or retailer. f) In the absence of a protest and request for a hearing within 20 days, the Department's decision shall become final without any further determination being made or notice given. g) No license so revoked shall be reissued to any such distributor, secondary distributor, or retailer within a period of 6 months after the date of the final determination of the revocation. [35 ILCS 130/6]