Will a state-prescribed Texas sales tax exemption certificate that a customer completes electronically, signs with an electronic signature pad, and stores only in electronic form pass muster in a Comptroller audit?

Plain-English summary

A software vendor built a customized system, "Burden of Proof" (BP), that automates the creation, quality review, and maintenance of exempt sales and their exemption certificates. Using BP, a customer completes a certificate electronically, and the system is designed to accept only exemption claims that actually match the customer's stated business function. The completed certificate goes to the customer for signature via an electronic signature pad, and once created, these state-prescribed certificates are not alterable and are kept available electronically for later review. The vendor asked whether a certificate created, signed, and stored this way would hold up under a Texas Comptroller audit.

The Comptroller confirmed it: the audit division accepts certificates with electronic signatures, in addition to certificates that have been scanned, faxed, or microfiched — so the Comptroller "did not foresee a problem" with accepting certificates completed and electronically signed through the BP system as described.

What this means for you

Businesses using or building electronic exemption-certificate systems

An electronically completed and signed state-prescribed exemption certificate, stored in non-alterable electronic form, is an acceptable audit record in Texas — you don't need a wet-ink signature or a paper original on file, as long as the certificate accurately captures the customer's exemption claim.

Software vendors building tax compliance/documentation tools

Building in safeguards like restricting exemption claims to those consistent with the customer's stated business function, and making completed certificates non-alterable once created, supports the kind of record integrity the Comptroller looks for when accepting electronic documentation.

Accountants and tax professionals

A useful early (1999) confirmation that electronic signatures and electronic-only storage of exemption certificates are acceptable for Texas sales tax audit purposes, alongside more familiar formats like scanned, faxed, or microfiched documents.

Common questions

Q: Does a Texas exemption certificate need a physical signature to survive an audit?
A: No — the Comptroller's audit division accepts certificates with electronic signatures.

Q: Can an exemption certificate be stored only in electronic form, with no paper copy?
A: Yes, based on this letter — electronic storage is accepted alongside scanned, faxed, or microfiched formats.

Q: Does the certificate need to be non-alterable once created?
A: The system described in this letter produces non-alterable certificates once created, which the Comptroller found acceptable; the letter doesn't state that alterability alone would disqualify a certificate, but non-alterability supports its integrity as an audit record.

Q: Can I rely on this letter for my own electronic recordkeeping system today?
A: No. It's based on the specific system and facts described and can be relied on only by the taxpayer to whom it was issued; other facts, even if similar, may produce a different result, and recordkeeping technology/policy may have evolved since 1999.

Citations and references

No specific Tax Code section or numbered Comptroller rule is quoted in the body of this letter; the answer describes the Comptroller audit division's general acceptance practices for electronically signed and stored exemption certificates.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9907599L

Original ruling text

July 28, 1999

Dear Mr. **:

Thank you for your letter regarding your customized software, "Burden of Proof"
("BP"), that automates the creation, quality review, and maintenance of exempt
sales and the applicable exemption certificates.

Using BP, the customer completes the certificate electronically, declaring the
statutory reason for exemption. The system is designed to accept only
exemption claims that are connected and appropriate to the customer's stated
business function. Once the customer completes the certificate and the
information is affirmed, BP forwards the information to the proper exemption
certificate for customer signature. The customer signature is completed
through the use of an electronic signature pad. Once created, State prescribed
exemption certificates produced by BP are not alterable and are available in
electronic form for future review.

You asked for confirmation that a "State prescribed" certificate that has been
electronically completed, signed by the customer, and stored in the manner
described above would pass audit muster in Texas.

Our audit division currently accepts certificates that contain electronic
signatures in addition to certificates that have been scanned, faxed or
microfiched. I do not foresee a problem with our acceptance of certificates
that are completed, and electronically signed, using your BP system.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this satisfactorily answer your questions. If you have any other
questions, please call Gilbert Zamora, a tax specialist in our Tax Policy
Division, toll free at 1-800-531-5441, extension 3-4502. Gilbert's Austin
number is 512/463-4502. Or you may e-mail Gilbert at
.

Sincerely,

Harold Lee
Director
Tax Administration

cc: Gilbert Zamora
Ledford Kelly
David Rock