Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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460.0000 REIMBURSEMENT FOR SALES TAX—Regulation 1700

Annotation 460.0016

460.0016 Charge Customers for Obtaining Refund. In an audit of the taxpayer, the staff determined that the taxpayer was leasing equipment and selling materials in connection with its "special" process. The taxpayer appealed the audit determination. While the appeal was in process, the taxpayer collected sales and use tax on its "special" process receipts. Thereafter, the Board reversed the staff's position and determined that the "special" process was a nontaxable service. The taxpayer and its customers then entered into an agreement in which the taxpayer would file a claim for refund on behalf of the customers.

In this case, there was excess sales tax reimbursement and use tax collected from the customer. In the case of excess reimbursement of sales tax, the taxpayer must refund the excess tax reimbursement in full to the customer from whom an excess amount was collected. The customer's right to receive a refund of excess tax reimbursement collected cannot be contingent upon the customer's reimbursement of the taxpayer's expenses.

In the case of the overpayment of use tax by a customer to a retailer who is required to collect the tax, each customer may directly file a claim for refund with the Board for the overpayment of the use tax. Alternatively, each customer has the discretion to hire a representative to file a claim for refund on its behalf. Based on the agreement between the taxpayer and the customer, the customer knowingly and willingly entered into the agreement for its convenience. Therefore, the taxpayer may charge for services rendered in filing a claim for refund on behalf of its customers for the overpayment of use tax, but may not do so with respect to the excess sales tax reimbursement. 1/12/96.