The New York Division of Taxation's resort to an indirect audit method to determine the sales tax liability of a corporation operating a restaurant was proper. There was no question that the division properly requested the taxpayers' records for review during the sales tax audit. However, the taxpayers did not present books and records sufficient to allow the division's auditors to perform a detailed audit. Even though the taxpayers provided register tapes, bank statements, sales tax returns, daily summary sheets, expense invoices, and a handwritten list of capital assets and exemption certificates, the division was unable to verify the accuracy of these records absent a general ledger, register tape recording cash sales, or other record of its cash sales or sequentially numbered guest checks. Thus, the division was entitled to resort to external indices to determine the taxpayers' sales and use tax liability. The taxpayers' contention that complete and accurate records were provided to the division was rejected.

Having established that the records were so insufficient that it was virtually impossible to verify taxable sales by means of a complete audit, the division was entitled to resort to an estimate of the taxpayers' sales, as long as the method was reasonably calculated to reflect the taxes due. This was accomplished with the use of the 2002 Restaurant Industry Report and information taken from the taxpayer's only filed federal income tax report and information about the restaurant known to the division's audit staff. The taxpayers had the burden of proof to show, by clear and convincing evidence, that the result of the audit was unreasonably inaccurate or that the amount of tax assessed was erroneous. However, the taxpayers failed to meet this burden as they offered no credible evidence to refute the audit results. Any imprecision in the audit results arose by reason of the taxpayers' failure to maintain adequate books and records as required by statute and was borne by the taxpayers. Finally, the imposition of penalties was proper because the taxpayers failed to provide reasonable cause for the nonpayment of sales tax due.