42-5168. Use tax percentage based reporting; definitions

A. The director may permit a taxpayer to use a percentage based reporting method for determining the amount of use tax that is due under this article by issuing a letter of authorization to the taxpayer.

B. When issuing a letter of authorization and determining the standards that a taxpayer shall use to calculate use tax under this article, the director may categorize transactions by the dollar amount, the types of taxable items that are purchased or the purposes for which the taxable items are used or by other standards that are appropriate to the taxpayer's operations. The director shall consider the taxpayer's type, nature and amount of records and transactions when determining the standards.

C. A letter of authorization that is signed by the director and countersigned by the taxpayer shall be valid for no longer than four years.

D. The director may revoke a letter of authorization that is issued under this section if either of the following applies:

1. The taxpayer has committed any fraud, malfeasance or misrepresentation of a material fact. A revocation under this paragraph is effective on the date the fraud, malfeasance or misrepresentation occurred or on any later date that is determined by the director.

2. The director determines that the percentage stated in the letter of authorization is no longer valid because of a change in the law, a change in the interpretation of a law or an administrative rule or a change in the taxpayer's business operations. A revocation under this paragraph is effective on the first day of the month that is at least ninety days after the taxpayer receives the notice of revocation.

E. The director's decision to revoke a letter of authorization under subsection D is final and may not be appealed.

F. The department may audit a taxpayer who has been issued a letter of authorization for the transactions that are listed in the letter, but the audit shall be limited to whether the taxpayer properly calculated the amount of use tax according to the terms of the letter. A taxpayer may protest the determination of the audit, but the protest shall be limited to whether the department's proposed changes are correct according to the terms of the letter of authorization.

G. For the purposes of this section:

1. " Letter of authorization" means a letter that is signed by the director, that authorizes a taxpayer to use a percentage based reporting method and that specifies the standards for the taxpayer to follow.

2. " Percentage based reporting method" means a method by which a taxpayer categorizes purchase transactions according to the standards that are specified in a letter of authorization, reviews approved sample invoices for each category of transactions when determining the percentage of taxable transactions and uses that percentage to calculate the amount of use tax that is due under this article.