Tax Type
Retail Sales and Use Tax
Description
Returned goods and repossessions; Handling charge on returned merchandise
Topic
Basis of Tax
Date Issued
06-10-1994
June 10, 1994
Re: Request for Ruling: Retail Sales & Use Tax
Dear*******
This will respond to your letter seeking a ruling on the application of the retail sales and use tax to "handling charges" made by your company, the "Taxpayer," on certain returned goods.
FACTS
The Taxpayer, a paint and wallcovering store, typically charges customers who return specially ordered merchandise a 25% handling charge which is used to cover the cost of returning the merchandise to the vendor. Customers are refunded the total amount paid for the merchandise less the handling charge. The amount of sales tax refunded is based only on the balance remaining after the handling charge is deducted. You seek a ruling as to whether the tax is appropriately being handled.
RULING
Va. Code § 58.1-619 provides in part that "the amount of tax so reimbursed to the dealer shall not, however, include the tax paid upon any cash retained by the dealer after such return of merchandise." Since the handling fee is deducted from the amount refunded to customers on returned merchandise, the dealer is not entitled to claim a credit or refund for the tax paid on this charge. Likewise, the customer is not entitled to a refund of the tax paid on this charge from the
dealer.
Accordingly, the Taxpayer has properly been handling these transactions.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/7019H
Rulings of the Tax Commissioner