Could a country club satisfy Florida's customer-refund requirement through a board resolution creating automatic member credits?

Plain-English summary

The club's binding board resolution satisfied the requirement to return tax to its members before the Department paid an otherwise valid refund claim. The resolution created an automatic credit to each current member's house account for the member's attributable share of any state refund.

A member could choose to contribute that amount to the club's capital fund, but the credit first belonged absolutely to the member. That legal obligation and automatic credit counted as repayment; cash was not the only acceptable form.

The Department did not decide whether sales tax had actually been overpaid on the capital assessments. It decided only whether the proposed member-credit mechanism met the customer-refund prerequisite if the underlying claim proved valid.

What this means for you

A dealer generally cannot recover tax it collected from customers without first returning it to them. A binding, unconditional customer credit can satisfy that rule, but a mere promise without an absolute customer entitlement may not.

Common questions

Q: Was cash repayment required? No. An absolute credit in the member's favor was sufficient.

Q: Did the resolution create that credit? Yes.

Q: Could a member leave the amount in the capital fund? Yes, by choice after receiving the entitlement.

Q: Did the ruling approve the underlying tax-refund claim? No. It addressed only the repayment requirement.

Citations and references

• Fla. Stat. § 213.756 — dealer-collected tax and customer refund requirement
• Fla. Stat. § 215.26(1) — state tax refunds
• Fla. Admin. Code r. 12A-1.014 — sales-tax refund procedure
• Fla. Stat. § 617.0801 — board authority cited
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02A-010

Original ruling text

SUMMARY

QUESTION: Whether the adoption of a resolution by Club's
Board of Directors obligating the Club to return to its
members all sales taxes refunded on certain payments made
by those members to the club is sufficient to satisfy the
requirement that the taxes must be refunded to members
before the Department may grant the Club a refund.

ANSWER - Based on the facts below: Section 213.756, F.S.,
requires that the Club refund to the members the tax before
the Department may grant a refund. The refund must be paid
in cash or in the form of an absolute credit in favor of
the member. This is done here because the members will
receive an automatic credit to their house account or have
the option to place the funds in the capital expenditure
fund.

Feb 27, 2002

Subject: Technical Assistance Advisement 02A-010
Capital Assessments, Refund
Sales and Use Tax
Section 213.756, F.S., Section 215.26(1), F.S.
Rule 12A-1.014, F.A.C.
XXX ("Club")
FEI #: XX

Dear :

This is in response to your letter dated November 13, 2001,
requesting a technical assistance advisement regarding refunds
on capital assessments by the Petitioner.

ISSUE PRESENTED

Whether the adoption of a resolution by Club's Board of
Directors obligating the Club to return to its members all sales

taxes refunded on certain payments made by those members to the
Club is sufficient to satisfy the requirement that the taxes
must be refunded to members before the Department may grant the
Club a refund.

FACTS

The Club is a non-profit corporation formed under the laws of
the State of Florida. It owns and operates a country club in XX
("City"), Florida. Since January 1994, Club has imposed and
collected from each of its members a monthly capital assessment
charge of $35. Club collected and remitted sales tax on these
capital assessments but has now submitted to the Department a
refund claim, which asserts that sales tax was not due on these
charges. The claim is limited to taxes collected from persons
who are currently members of the Club.

After filing the refund claim, Club was advised by the
Department that it must submit proof that the sales taxes had
been refunded to the members before the claim, if determined by
the Department to be valid, would be paid to Club. Prior to
filing the refund claim, Club's Board of Directors adopted a
resolution (the "Resolution") obligating the Club to refund to
its members any sales taxes returned to the club in response to
the refund claim. The Resolution requires that the Club provide
to each member a credit against their account balance with the
Club in an amount equal to the taxes received from the state
that are attributable to that member. Alternatively, the member
can choose to contribute that amount to the club's capital fund.

TAXPAYER POSITION

Your request states in part:

Frequently, sale tax errors occur when a dealer charges and
collects tax upon non-taxable transactions. Once the error
has been recognized, however, a taxpayer may receive a
refund from the dealer. Rule 12A-1.014(4), [F.A.C.],
provides that a taxpayer who has overpaid tax to a dealer,
or who has paid tax to a dealer when no tax is due, must
secure a refund of the tax from the dealer and not from the

Department. This rule appears to be based on section
215.26, F.S., which requires the Department to refund the
tax to the same person who remitted the tax to the State.

Section 215.26(1)(b), [F.S.], provides that the dealer is
authorized to receive a refund of the tax remitted to the
state on transactions where no tax was due. Rule [12A1.014, F.A.C.], however, requires that the dealer must
refund the sales tax to the customer prior to having its
credit or refund claim approved by the Department. The
rationale for this rule is that the dealer does not bear
the financial burden of the wrongfully extracted sales tax,
and accordingly, does not have standing to demand a refund.
[State ex rel.]Szabo Food Services, Inc. of North Carolina
v. Dickinson, 286 So.2d 529 (Fla. 1973).

In this matter, [Club] collected and remitted to the
Department sales taxes from its members which it
subsequently learned were not due. In order to comply with
the Department's requirement that [Club] refund the taxes
to its members prior to obtaining a credit or refund from
the Department, the organization's Board of Directors
adopted a Resolution requiring [Club] to credit its
members' accounts with any sales taxes returned to the
[Club]. Specifically, the Resolution requires [Club] to
credit the accounts of its members with an amount equal to
the sales taxes received from the State that are
attributable to each respective member. In the
alternative, each member may elect to contribute this same
amount to [Club's] capital fund.

The Resolution satisfies the Department's requirement that
[Club] refund the taxes to its members prior to obtaining a
refund from the State. Section 617.0801, Florida Statutes,
provides that "all corporate powers shall be exercised by
or under the authority of, and the business and affairs of
the corporation managed under the direction of, its board
of directors..." Thus, the Resolution is an official act
of Club's corporate powers which is binding upon the club.
See also, Orlando Orange Groves Co., et al., v. Hale, et
al., 161 So. 284 (Fla. 1935) (resolution adopted by

corporation's board of directors to approve assignments of
certain contracts was binding upon the corporation).
Therefore, the Resolution adopted by [Club's] board of
directors clearly obligates the club to credit the members'
accounts with an amount equal to the sales tax attributable
to the respective member. Therefore, the Resolution should
be deemed sufficient evidence that [Club] will refund the
sales taxes received from the state to its members. Given
that [Club's] refund claim is limited to current members,
the account credit procedure will insure that all monies
received by [Club] will be returned to the person from whom
the taxes are collected. (emphasis in original)

RULING REQUESTED

The Club requests that the Department determine that the
Resolution is sufficient to satisfy the requirement that Club
refund the sales taxes to its members prior to obtaining a
refund from the State.

APPLICABLE STATUTES AND RULES

Section 215.26(1), F.S., states in part:

(1) The Comptroller of the state may refund to the person
who paid same, or his or her heirs, personal
representatives, or assigns, any moneys paid into the State
Treasury which constitute:

(a) An overpayment of any tax...;

(b) A payment where no tax... is due; and

(c) Any payment made in to the State Treasury in error;....

Section 213.756, F.S., provides:

Funds collected from a purchaser under the representation
that they are taxes provided for under the state revenue
laws are state funds from the moment of collection and are
not subject to refund absent proof that such funds have

been refunded previously to the purchaser.

Rule 12A-1.014(3), F.A.C., provides:

(3) Whenever a dealer credits a customer with tax on
returned merchandise or for tax erroneously collected, the
dealer must refund such tax to the customer before the
dealer's claim to the State for credit or refund will be
approved.

RESPONSE

Section 213.756, F.S., requires that the Club refund the tax to
the members before the Department may grant a refund. The
refund must be paid in cash or in the form of an absolute credit
in favor of the member. Here, the Resolution creates a legal
right in favor of the existing members similar to that provided
by a credit, since the Club is legally bound, as provided by
Orlando Orange Grove, supra, and section 617.0801, F.S., to the
members for the amount of the tax refunded by the Department.
If the refund claim is determined to be valid, the Resolution
requires current members of the Club from whom the tax was
collected to receive a notification that they have a credit to
their house account (or may voluntarily elect to contribute this
amount to the Club's capital expenditure fund). Therefore, the
requirements of section 213.756, F.S., and section 215.26, F.S.,
regarding refund to the purchaser are satisfied.

This response constitutes a Technical Assistance Advisement
under Section 213.22, F.S., which is binding on the Department
only under the facts and circumstances described in the request
for this advice as specified in Section 213.22, F.S. Our
response is predicated on those facts and the specific situation
summarized above. You are advised that subsequent statutory or
administrative rule changes, or judicial interpretations of the
statutes or rules, upon which this advise is based, may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,

F.S., and are subject to disclosure to the public under the
conditions of s.213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Charles Wallace
Senior Attorney
Technical Assistance and Dispute Resolution
(850) 922-4734

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