Vendor sales tax refunds must be passed on to consumers

Vendor sales tax

Vendors normally collect sales taxes from consumers on behalf of the state. States need to provide some method for the refund or crediting of over payments in the case of returned goods, repossessions, or simple errors in tax calculation or interpretation.

When a product is returned and the money is refunded, the sale is undone and the tax is appropriately returned to the vendor which returns it to the consumer. The same theory applies to the uncollected portion of the sales price on repossessions and bad debts if the sale and tax had been previously reported.

Most states will only refund sales tax when presented with evidence that the tax has been returned to the consumers. Courts have ruled that to allow the vendor to keep the tax collected from the purchaser is “unjust enrichment,” therefore, vendor sales tax refunds from the state must be passed on to the consumer.

To claim a sales tax refund, the vendor must be able to document that the tax has been remitted to the state or local jurisdiction, that the tax was wrongfully or erroneously collected and remitted, and that the tax has been returned to the consumer where appropriate.

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