Could a seller obtain a Texas refund of tax, penalty, or interest collected from customers before returning the tax and interest to those customers?

Plain-English summary

The Comptroller said a seller—including a telephone company—could not receive a state refund of tax, penalty, or interest it had collected from another person until it first refunded all tax and interest to that person.

The letter pointed to Rule 3.325(c)(4) for that condition. It also directed the requester to sections (c) and (c)(2) for the period during which the state would pay interest on transactions the seller had taxed erroneously, subject to the rule's other requirements.

What this means for you

Under the 1988 procedure, a seller could not keep the customer's money and also recover it from the state. Customer repayment came first, and the state claim remained subject to the rest of Rule 3.325.

Common questions

Could the seller claim a state refund before paying customers? No.

What had to be returned to customers first? All tax and interest collected from them.

Did the letter address state-paid interest periods? Yes, by directing the requester to Rule 3.325(c) and (c)(2).

Citations and references

• 34 Tex. Admin. Code Rule 3.325(c), (c)(2), and (c)(4), cited for the historical refund and interest procedure.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8803L0865G04

Original ruling text

March 10, 1988

Dear ***:

I am responding to your letter to Mr. Harry Rogers, requesting clarification on
sales tax refund procedures.

Rule 3.325 has been revised and I am enclosing this for your information.Your specific
question is restated with response.

Does Rule 3.325, or other State Statute, require sellers, including telephone companies,
to make refunds including interest, on taxes billed in error?

Response: Section (c)(4) explains that no refund of the tax, penalty, or interest will be
given a person (seller, including telephone companies) who collected the taxes from another
person until all taxes and interest are first refunded to the person from whom they were
collected.

You should take note of sections (c) and (c)(2). These sections state the period of time during
which the state will pay interest on transactions erroneously taxed by the seller. Refunds of
this tax penalty and interest are also subject to the other requirements of Rules 3.325.

This opinion is based on the facts presented. If there are additional or different facts, the
opinion may change.

You may write me at the Tax Policy Division.

Sincerely,

Tax Policy Division