How much sales tax could a retailer refund when its return policy refunded only part of the original merchandise price?

Plain-English summary

The retailer's policy reduced the merchandise refund as more time passed after delivery. A customer returning goods after the full-refund period received only a stated percentage of the original purchase price.

Florida ruled that the sales-tax refund had to track the amount of sales price actually returned. The customer was not entitled to all tax collected on the original sale when the retailer refunded only part of the price.

The retailer likewise could claim reimbursement only for the proportional tax it refunded to the customer.

What this means for you

When a return policy includes a restocking reduction, time-based credit, or other partial price refund, the associated sales-tax refund should be calculated in the same proportion.

Common questions

Did a returned item always produce a full sales-tax refund? No.

What controlled the tax refund? The percentage of the original sales price actually refunded.

Could the retailer claim more tax than it returned to the customer? No.

Citations and references

• Fla. Stat. § 212.17(1)(a) and Fla. Admin. Code r. 12A-1.014(1), as discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-026

Original ruling text

SUMMARY
QUESTION: When a customer returns merchandise and receives less than the original purchase
price, is the customer entitled to a full refund of the sales tax based upon the original purchase
price, or a partial refund of sales tax based upon the percentage of the original purchase price
actually refunded to the customer?
ANSWER: When the customer is refunded a percentage of the sales price based upon the
amount of time that the customer has had use of the merchandise, the Taxpayer may only claim a
refund of sales tax refunded based upon the percentage of the sales price refunded.
June 9, 2009
XXX
Re:

Technical Assistance Advisement 09A-026
Sales & Use Tax – Refund of Sales Tax
Section: 212.17, Florida Statutes (F.S.)
Rule: 12A-1.014, Florida Administrative Code (F.A.C.)
Petitioner: XXX (herein Taxpayer)
FEI: XXX

Dear XXX:
This letter is a response to your petition dated April 17, 2009, for the Department's
issuance of a Technical Assistance Advisement ("TAA") concerning the above
referenced party and matter. Your petition has been carefully examined and the
Department finds it to be in compliance with the requisite criteria set forth in Chapter 1211, F.A.C. This response to your request constitutes a TAA and is issued to you under
the authority of Section 213.22, F.S.
FACTS
The Taxpayer is a specialty retailer of luxury, designer and fashion merchandise. The Taxpayer
sells its merchandise through stores located in State of Florida as well as other states, and
through its websites. When the Taxpayer makes a retail sale, it collects sales tax, based upon the
original purchase price, from the customer and remits such amounts to the State of Florida.
In XXX, the Taxpayer instituted a new return policy (“New Policy”). Under the New Policy,
customers making returns to the Taxpayer more than XXX days after their receipt of
merchandise will be entitled to a partial refund of their original purchase price, as follows:
Return Within
0 – 60 days from receipt of merchandise
61 – 120 days from receipt of merchandise
121 – 180 days from receipt of merchandise

Amount of Credit
XXX of original purchase price
XXX of original purchase price
XXX of original purchase price

Technical Assistance Advisement
Page 2
181+ days from receipt of merchandise

0%

REQUESTED ADVISEMENT
When a customer returns merchandise pursuant to the New Policy and receives less than
the original purchase price, is the customer, and thus, Taxpayer, entitled to: (a) a full
refund of sales tax based upon the original purchase price, or (b) a partial refund of sales
tax based upon the percentage of the original purchase price actually refunded to the
customer?
LAW AND DISCUSSION
Section 212.17(1)(a), F.S., provides authority for a dealer to be reimbursed for the amount of tax
collected or charged when goods are returned to the dealer. Rule 12A-1.014(1), F.A.C., provides
in pertinent part as follows:
When a dealer refunds the sales, lease, or rental price of admissions, tangible personal
property, transient rentals, real property, or services upon which tax has been paid by the
purchaser or lessee to the dealer and remitted by the dealer to the state, the dealer shall
also refund the tax paid by the purchaser. . . .
(emphasis supplied)
The refund of sales tax is associated with the refund of the sales price of the goods returned. In
this case, the Taxpayer is not refunding the sales price, but is, in fact, returning something other
than the sales price (i.e., a graduated percentage based upon the number of days the customer has
had the merchandise in their possession). Therefore, the amount of sales tax that may be
refunded must correspond to the amount of the sales price refunded. In other words, when the
Taxpayer’s customer returns merchandise pursuant to the New Policy and receives less than the
original purchase price, a partial refund of sales tax may be refunded based upon the percentage
of the original purchase price actually refunded to the customer.
RESPONSE
The Taxpayer is not refunding the “sales price” under its New Policy. Rather, the Taxpayer is
refunding a percentage of the sales price based upon the amount of time that its customer keeps
the purchased goods in their possession before seeking to return the goods to the Taxpayer.
Accordingly, the Taxpayer may only claim a refund for sales tax refunded to its customer based
upon the percentage of the sales price refunded.
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

Technical Assistance Advisement
Page 3
advice 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 Section 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 10 days of the date of this
letter.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850) 922-4727.
Sincerely,

Horace Royals
Senior Tax Specialist
Technical Assistance & Dispute Resolution

Record ID:

63300