601 KAR 1:147. Auditing of U-drive-it permit holders.
RELATES TO: KRS 131.340, 138.462, 138.463, 138.4631, 186.005, 186.281, 281.615-281.670
STATUTORY AUTHORITY: KRS 138.463, 138.4631
NECESSITY, FUNCTION, AND CONFORMITY: KRS 138.463 and 138.4631 require the Transportation Cabinet to assess, collect, and audit the monthly U-drive-it usage tax. This administrative regulation establishes the recordkeeping requirements for a permit holder and the audit procedures of the Transportation Cabinet.
Section 1. Definitions. (1) "Lease" is defined in KRS 138.463(3).
(2) "Rental" is defined in KRS 138.462(2).
Section 2. Recordkeeping. (1) Rental records.
(a) A holder of a U-drive-it permit who rents vehicles shall:
1. Develop a consecutive, preprinted numbering system for its rental agreements;
2. For each motor vehicle included in the permit holder's rental fleet, retain a copy of the original invoice from the manufacturer or some other document which shows the manufacturer's suggested retail price of the motor vehicle plus the cost of all options included on the motor vehicle; and
3. Retain a copy of each rental agreement in consecutive order, including a voided or damaged agreement.
(b) The following information shall be included on a rental agreement:
1. Rental agreement number;
2. Beginning date of the rental;
3. Ending date of the rental;
4. Identification of the specific rental vehicle which includes the following:
a. Vehicle identification number;
b. Make;
c. Model; and
d. Year;
5. Odometer reading of the rental vehicle at the beginning of the rental agreement;
6. Odometer reading of the rental vehicle at the end of the rental agreement;
7. Amount charged for the rental agreement;
8. Method of calculation of the rental amount charged which includes mileage charges and number of days used; and
9. Identification of the person renting the vehicle.
(c) The record of a rental transaction shall be maintained for a period not less than six (6) years after the due date of the U-drive-it tax return.
(2) Lease records. A holder of a U-drive-it permit who leases vehicles shall retain a copy of the leasing agreement and other information as required by this subsection.
(a) A lease agreement shall include the following information:
1. Complete name and address of the lessee;
2. Beginning date of the lease;
3. Ending date or term of the lease;
4. Identification of the lease vehicle which includes the following:
a. Vehicle identification number;
b. Make;
c. Model;
d. Year; and
e. Manufacturer's suggested retail price;
5. Final lease termination calculation and date;
6. Monthly payment amount subject to the tax imposed by KRS 138.463;
7. Down payment or trade-in information; and
8. Dated signature of the lessee and the lessor.
(b) The following, if applicable, shall be attached to the lease agreement:
1. Certificate of title of the leased vehicle;
2. A lease amount calculation worksheet;
3. A lease extension agreement;
4. Documentation of a lease early termination; and
5. Other information which would alter the original lease agreement.
(c) The record of a lease transaction shall be maintained for a period not less than six (6) years after the due date of the U-drive-it tax return.
Section 3. Audits of Permit Holders. (1) The Division of Audit Review shall notify the permit holder of the date, time, and location of the audit. At least fifteen (15) days' advance notice shall be given to the permit holder.
(2) Pursuant to the requirements established in KRS 138.463(6), the audit period shall not exceed either four (4) years or six (6) years.
(3) Except as provided by subsection (4) of this section, failure of the permit holder to make available a requested record required to be kept by the permit holder pursuant to Section 2 of this administrative regulation for which the permit holder is not able to provide sufficient alternate records to the auditor shall result in an assessment of tax based on KRS 138.460, 601 KAR 1:146, or cancellation of the permit, whichever is appropriate as determined by the audit.
(4)(a) A missing or incomplete record shall result in an assessment based on KRS 138.460 or 138.463, whichever is appropriate as determined by the audit.
(b) In computing the assessment for a specific transaction, the permit holder shall be given credit for a tax previously remitted to the Transportation Cabinet for that transaction.
(5) If an audit is being conducted, the auditor shall conduct and document a preaudit conference with the permit holder outlining the operation, audit procedures, records to be examined, sample period (if any), and sampling procedures. The permit holder and auditor shall determine at the preaudit conference who shall be:
(a) Responsible for the final acceptance of audit findings; and
(b) Involved in the close-out conference.
(6) If the audit is being conducted, the auditor shall conduct and document a close-out conference with the permit holder outlining preliminary findings to include applicable penalty and interest, recommendations, rights of appeal, and to whom the audit report shall be addressed.
(7) The Transportation Cabinet shall furnish the permit holder a letter of audit findings and recap schedules. If requested, the cabinet shall supply detailed work papers which are backup material to the recap schedules to the permit holder.
(8) If an audit indicates that additional tax is owed, the Transportation Cabinet shall issue a Notice of Tax Due statement.
(9) The permit holder shall within forty-five (45) days of the date of the notice of tax due statement pay the tax due or protest in writing pursuant to Section 4 of this administrative regulation.
Section 4. Protest or Appeal of Audit Results. (1) The permit holder may within forty-five (45) days of the date of the letter of transmittal of the audit findings, protest in writing to the Transportation Cabinet, Division of Audit Review a portion of the audit.
(2) If the permit holder does not protest, the audit and the notice of tax due statement shall be final on the beginning of the 46th day.
(3)(a) If a permit holder protests pursuant to this section, the protest shall include a supporting statement and documents which identify:
1. The specific adjustments requested;
2. The portions of the audit being protested; and
3. The reasons the protest is being made.
(b) If the supporting statement and documents are not sufficient to cause the Transportation Cabinet to change the audit or notice of tax due statement as requested by the permit holder in its protest, the permit holder shall be notified to attend an information gathering and protest conference with the Division of Audit Review. The information gathering and protest conference shall be scheduled to be held within thirty (30) days of the issuance of the written protest. It may be rescheduled one (1) time by either party.
(4) The permit holder shall within thirty (30) days of the date of the final audit or final notice of tax due statement:
(a) Pay the tax due; or
(b) Appeal to the Kentucky Board of Tax Appeals pursuant to KRS 131.340. (24 Ky.R. 1185; Am. 1525; 2366; eff. 5-18-98.)