Did a lumber seller have to refund original delivery charges and related tax to claim a returned-merchandise deduction?

Plain-English summary

A lumber company claimed returned-merchandise deductions but did not refund or credit the portion of the sale price representing delivery expense incurred before the sale or the tax attributable to that amount.

California said the full sale price had not been refunded, so the deductions should be disallowed. The original delivery charge was part of the taxable price that had to be restored to the customer.

A separate charge for retrieving the lumber from the customer was different. That retaking charge did not automatically prevent the deduction if the return otherwise met the applicable conditions.

Common questions

Did the seller have to refund the original delivery charge?

Yes, because it was part of the sale price on the facts described.

Did the seller also have to refund the related tax reimbursement?

Yes.

Could the seller separately charge to pick up the returned lumber?

Yes, if the historical return conditions were otherwise satisfied.

Citations and references

• Cal. Rev. & Tax. Code § 6012 — full-sale-price requirement cited by the memorandum
• Historical Sales Tax General Bulletin 52-8 — conditions for a separate retaking charge

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/490-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/490-0380.pdf

Original ruling text

State of California

Board of Equalization

490.0380

Memorandum
To:

Los Angeles – Auditing (LJR)

From:

Headquarters – Sales Tax Counsel

Subject:

REDACTED TEXT

Date:

September 1, 1953

From the facts stated in Auditor Wm. Dineen’s memo of August 21, 1953, transmitted with your memo of August 25, it appears clear that the claimed deductions for returned merchandise should be disallowed. The lumber company, by not refunding or crediting that portion of the sales price represented by delivery expense occuring prior to the sale as well as the tax thereon, has not refunded the “full sale price” within the meaning of Section 6012. We understand from your memo that the cartage in question is for delivery of the lumber to the customer and not for retaking it. The making of an additional charge for retaking the lumber from the customer would not prevent the deduction from being allowable, provided the conditions as specified in Sales Tax General Bulletin 52-8 are present. With respect to “stickers”, there appears to be a difference of opinion as to the facts. If it is true that the stickers are returned to the lumber company, it is clear that they cannot be regarded as purchased for resale. It also appears that there is a use made of them other than as nonreturnable containers. It, therefore, appears that you should include the stickers in the proposed determination and perhaps the factual dispute can be resolved at a preliminary hearing. E. H. Stetson EHS:ph