Tax Type
Retail Sales and Use Tax
Description
Returned goods and repossessions; Restocking fee
Topic
Basis of Tax
Date Issued
06-18-1996
June 18, 1996
Re: Request for Ruling: Retail Sales & Use Tax
Dear**************
This will reply to your letter of May 24, 1996 which seeks a ruling on the application of the retail sales tax to "restocking fees".
FACTS
The Taxpayer is contemplating the implementation of a restocking fee for customers that return unused products. The purpose of the fee is to cover the time and expense in returning unused items to resale inventory. The fee will be nominal and based on percentage of value.
RULING
Code of Virginia § 58.1-619 provides in part that:
- In the event purchases are returned to the dealer by the purchaser or consumer after the tax imposed by this chapter has been collected or charged to the account of the purchaser, the dealer shall be entitled to reimbursement of the amount of tax so collected or charged by him, in the manner prescribed by the Tax Commissioner. 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 restocking fee is deducted from the amount refunded to the customer on returned products, the dealer is not entitled to claim a credit or refund for the tax paid on the fee. Likewise, the customer will not be entitled to a refund of the tax paid on the restocking fee from the dealer. I have enclosed a copy of P.D. 94-188 previously addressing this same issue.
If you have any additional questions regarding this matter, please contact **** of the department's Office of Tax Policy at ********* .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11280Q
Rulings of the Tax Commissioner