refund of sales taxes
Sales tax rules often confuse customers and businesses alike. Perhaps the only thing more perplexing is the process of seeking a refund of sales taxes from the state when customers are overcharged. A group of Pennsylvania customers of the popular BJ’s Wholesale Club learned this lesson recently when a state appeals court threw out their lawsuit seeking such a refund.
The BJ’s customers purchased various items from the wholesaler using coupons. But BJ’s assessed state and local sales tax based on the non-discounted price of the items. The total sales tax paid was relatively low – about $3.50 per item – but the customers argued they should have paid less after taking the coupons into account.
The customers initially filed a class action against BJ’s in a Philadelphia court. But in Pennsylvania, customers must take their case for a refund of sales taxes directly to the state’s Department of Revenue. Although the customers initially asked for a hearing before the department, for some reason they withdrew this request and instead sent a letter to the agency’s chief counsel, seeking clarification of the applicable sales tax rules.
The chief counsel responded the customers were not entitled to a refund. Under department regulations, the chief counsel said, “amounts representing manufacturer’s coupons or discounts shall be excluded from the taxable purchase price of a product if both the items purchased and the coupons are described on the cash register tape.” In other words, the coupon had to be linked to a specific item; otherwise, the customer owed sales tax on the full purchase price of the item. Here, BJ’s receipts only listed a “scanned coupon” without linking it to any particular item.
The customers asked the Board of Finance and Revenue, another agency within the department, to review and reverse the chief counsel’s determination. The board replied it was powerless to do so, as the chief counsel’s letter was merely a statement of “the Department’s position on an issue,” not a final administrative order subject to appeal. The customers then appealed to the Pennsylvania courts, which were similarly unreceptive. The Commonwealth Court of Pennsylvania, in a November 24 opinion, agreed with the department and a lower court there was no procedure under state law “for an appeal of an advisory opinion.” This means the customers must begin anew and directly ask the department for a refund of sales taxes, which the agency is likely to deny given its advisory opinion.
S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog PrivyCouncil.info