Sec. 03.06.01.42. Effective Rate Agreements

A. Definitions.

(1) In this regulation, the following terms have the meanings indicated.

(2) Terms Defined.

(a) "Effective rate" means a calculated percentage derived from analysis of selected accounts for a selected sample period.

(b) "Effective rate agreement" means an agreement between the Comptroller and a vendor that allows a vendor to compute its sales and use tax liability for purchases made by the vendor for a specific period using a predetermined agreed upon effective rate.

B. On or after July 1, 2002, the Comptroller may enter into an effective rate agreement to allow a vendor to compute its sales and use tax liability reportable on purchases.

C. Requirements.

(1) An effective rate agreement shall:

(a) Specify the types of records to be maintained by the vendor;

(b) Have a predetermined expiration date; and

(c) Contain provisions for modification of the effective rate due to law changes and court decisions that have an affect on the sales and use tax due.

(2) An effective rate agreement may exclude specific types of purchases of specific dollar amounts.

(3) To be eligible for an effective rate agreement, a vendor:

(a) Shall maintain an acceptable system of internal controls and business records;

(b) Shall make a large volume of taxable purchases in the effective rate period applied for;

(c) May not have a history of poor or improper reporting of taxes collected;

(d) May not have filed for bankruptcy within the last 10 years or be controlled by a related taxpayer that has filed for bankruptcy within the last 10 years; and

(e) May not have been or currently be a subject of a criminal or fraud investigation.

(4) Applications to enter into an effective rate agreement with the Comptroller shall be in writing and contain the following vendor information:

(a) Name;

(b) Address;

(c) Central registration number;

(d) Type of business;

(e) Gross annual sales and purchases;

(f) Reason for the request to enter into an effective rate agreement;

(g) A statement attesting that the vendor meets the minimum criteria stated in §C(3) of this regulation; and

(h) Signature of an officer responsible for the payment of taxes.

D. Revocation of an Effective Rate Agreement.

(1) Either the Comptroller or the vendor may void an effective rate agreement without cause after 30 days written notice.

(2) The Comptroller may void an effective rate agreement:

(a) If the vendor's operation significantly changed during the term of the agreement;

(b) Immediately upon revocation of the direct pay permit; or

(c) For cause.

E. An effective rate agreement may not be implemented until the vendor has applied for and is issued a direct payment permit by the Comptroller.