How does a vendor recover tax reimbursement it returns to a customer after the amount was already reported to California?

Plain-English summary

California distinguished reimbursement returned during the same quarterly reporting period from reimbursement returned after it had already been reported.

If the vendor collected and returned the amount within the same quarter, it could deduct the returned reimbursement on that quarter's sales-tax return. If the vendor had already reported the collection on a filed return for an earlier period, it could not deduct the repayment on a later return. It had to submit a claim for refund to the Board.

The letter stated that the vendor generally had three years from the due date of the return that reported the erroneous collection to file the claim under section 6902.

Common questions

Can a vendor deduct a customer repayment on a later sales-tax return?

No, if the amount was already reported in an earlier quarter.

What must the vendor do instead?

File a refund claim with the Board.

When was a direct return deduction allowed?

When collection and repayment both occurred in the same quarterly period.

Citations and references

• California Revenue and Taxation Code § 6902

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/460-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/460-0170.pdf

Original ruling text

460.0170

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6496

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego

August 25, 1993

MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS

Controller, Sacramento

Mr. S--- O--Controller
C--- S--- Federal Credit Union
XXXX --- Boulevard
---, CA XXXXX

BURTON W. OLIVER

Executive Director

Dear Mr. O---:
In a letter dated February 16, 1993, I responded to your request for assistance in obtaining a refund of California sales taxes paid to vendors by the C--- S--- Federal Credit Union. In my letter, I stated: "The amounts that were erroneously paid to the credit union vendors can be voluntarily returned to the credit union by the vendors. The vendors can then credit the amounts refunded to the credit union on the vendors' state tax returns if the amounts were previously reported." Vendors may deduct sales tax reimbursement collected and then returned by them to their customers from their tax returns only if the collection and return of these amounts occur within the same quarterly period. If the vendors have previously reported amounts collected from their customers on sales tax returns filed, the vendors must submit a claim for refund to the Board rather than deduct the amounts from a subsequent return. Generally, the vendor has three years after the return reporting the sales tax reimbursement collected was required to be filed to claim a refund of the amounts erroneously collected. (California Revenue and Taxation Code section 6902.) Very truly yours,

Thomas Cooke
Tax Counsel
TC:plh
cc: Audit Evaluation & Planning - MIC:40