Missouri court denies sales tax refund to big box retailer

Missouri sales tax refund

Missouri sales tax refund

Many retailers issue their own credit cards. These cards are actually backed by outside financing companies who collect a fee from the retailer on each purchase. When a customer uses a store credit card, the finance company pays the retailer the full purchase price, including any applicable sales tax. The retailer is then responsible for remitting any sales tax to the state or local government.

But what happens when a customer uses a store credit card and fails to pay the bill? The Missouri Supreme Court recently considered this issue in connection with the question of whether the retailer is entitled to a refund of any sales tax paid on such uncollected debts.Circuit city

In this case, the retailers were Circuit City and Dillard’s. Both issue private credit cards, Circuit City through JPMorgan Chase and Dillard’s through GE Capital. In 2010, both retailers asked the Missouri Department of Revenue to refund sales taxes previously remitted for sales that were later written off as bad debts by the credit card issuers. They argued Missouri law requires such a refund whenever sales tax is “erroneously or illegally collected.”

But neither the Department of Revenue nor the Missouri Supreme Court saw it that way. Judge Laura Denvir Stith, writing for a unanimous Supreme Court in an opinion issued July 29 of this year, said the retailers suffered no loss as a result of the bad credit write-offs. They were already paid in full. It was the card issuers—JPMorgan and GE—who took a federal tax deduction for the unpaid bills.

Nonetheless, the retailers argued they should be treated as part of a single “unit” together with their credit card partners. That would allow them to claim a sales tax refund for the card issuers’ losses. Again, Judge Stith said that was not the proper interpretation of Missouri law. The retailers and their credit card partners are clearly separate entities, not two parts of a single business entity. Stith said the retailers could not create a loophole whereby they could be considered a single unit for the sole purpose of obtaining a sales tax refund.

Ultimately, Stith said, neither the retailers nor their credit card partners were entitled to a sales tax refund under Missouri law. The banks didn’t pay any sales tax to begin with, and the retailers never suffered any actual losses that would make them eligible for a refund.

S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog Bonham’s Cases.

How to get a sales tax refund

sales tax refund

sales tax refund

In the shuffle of collecting sales taxes from your customers and paying sales taxes to your vendors, sometimes the occasional mistake comes up. If you realize you’ve overpaid taxes on a purchase or collected too much from a customer, you need to complete the process for a sales tax refund. Fortunately, this procedure isn’t too complicated and the government gives you a few options to handle the refund.

 

Paid too much in taxes

If you’ve paid too much in sales taxes, you generally have three ways to fix the mistake. First, you can file an amended sales tax return for the current period noting the overpayment. This will reduce the total amount in sales taxes you would have needed to collect for the government and would give your business a sales tax refund for the year.

You can also carry the overpayment forward as a credit for your next sales tax return so you’ll end up paying less the next tax period. Finally, you can apply directly for a refund from the agency in charge of sales taxes in your state. For example, in Texas you would apply through the Comptroller of Public Accounts

 

Collected too much in taxes

On the other hand, if you’ve collected too much in sales taxes from a client, you have a couple ways to return the money. First, you can directly refund the excess sales taxes to the client. If you regularly do business with that customer, you can also use the overpayment as a credit against sales taxes on future sales, though the customer needs to give written consent for this arrangement.

From there, you should follow the process of having paid too much in sales taxes. Since you returned the excess sales taxes to your customer, you are now in the position of having paid too much in sales taxes to the government.

 

Good records are key

Dealing with a sales tax refund is much easier when you have good records. To file for a refund, you’ll need your company’s name and tax information, the name of the customer involved in the transaction, clear invoices showing the sale and the sales taxes collected, and an explanation of why you need a refund. Without good sales and purchasing records, this will be hard to do.

 

Interest on sales tax refunds

It is possible that the government will pay interest on your overpayment of sales taxes. This often depends on how long it took to correct the mistake. For example, New York pays interest on sales tax refunds that took over three months to process from the date the application for a refund was received. If the New York government sends out the refund within three months of receiving the application, it doesn’t pay interest. The specific rules for your situation will depend on your state of business.

Ideally, your sales tax records will always be accurate so you don’t ever have to go through this extra work. However, if you are in the position of needing to process a refund, follow this advice so everything goes as smoothly as possible.

http://www.tax.ny.gov/pdf/current_forms/st/au11i.pdf

http://www.ct.gov/drs/cwp/view.asp?a=1477&q=269916

http://www.window.state.tx.us/taxinfo/refunds/sales/sellers.html

http://www.window.state.tx.us/taxinfo/refunds/sales/purchasers.html

 

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