Tax Type
Retail Sales and Use Tax
Description
Sales tax not refundable on rebates
Topic
Payment and Refund
Returns and Payments
Date Issued
01-10-2013
January 10, 2013
Re: Request for Ruling: Retail Sales, and Use Tax
Dear *****:
This is in reply to your letter in which you request a ruling on behalf of various retailers regarding the application of the retail sales and use tax to rebates issued to high volume customers.
FACTS
You state that the retailers sell products to customers throughout the month and collect and remit the retail sales and use tax for each transaction. Some of the retailers' customers purchase a high volume of products monthly. At the end of each month the retailers review their total sales for each customer to determine if a rebate is warranted. For example, if a customer purchases $10,000 in products, a retailer may decide to give a 10% rebate back to the customer. The retailer issues a check to the customer for $1,000. You question whether the sales taxes that were collected should be refunded with regard to the rebate. In addition, if the sales taxes are to be refunded, how are such sales tax refunds accounted for on the monthly sales tax return.
RULING
Title 23 of the Virginia Administrative Code (VAC) 10-210-3080 provides an interpretation of Va. Code § 58.1-619, which addresses returned goods. Title 23 VAC 10-210-3080 provides that a dealer may deduct from gross sales any portion of the sales price of tangible personal property returned by a customer and refunded to the customer. The remainder of this section provides guidance arid examples for such returns by customers.
With regard to your inquiry, the customers of the retailers at issue are not returning any tangible personal property previously purchased. In the example, the rebate of $1,000 is a gesture of goodwill between the retailers and their high volume customers. The sales tax should not be refunded on the amount of the rebate because there is no tangible personal property that has been returned upon which to base a deduction from gross sales and thus, a refund of the sales tax.
I trust that the foregoing response has addressed your concerns. This response is based on the facts provided as summarized above. Any change in the facts or the introduction of new facts may lead to a different result.
The Code of Virginia section and regulation cited are available on-line in the Tax Policy Library section of the Department's website located at www.tax.virginia.gov. If you have any questions regarding this matter, please contact ***** of the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
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- Tax Commissioner
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AR/1-5168634185.Q
Rulings of the Tax Commissioner