What is 'unjust enrichment' in Texas sales tax law, is it illegal for a seller to keep collected tax instead of sending it to the state, and what are the penalties?

Plain-English summary

Someone e-mailed the Comptroller asking three basic questions: what does "unjust enrichment" mean, is it illegal, and if so, what's the penalty? The answer lays out a foundational compliance doctrine that applies across all Texas sales tax collection.

The general principle: a seller may not enrich itself at the state's or a customer's expense by keeping any amount represented to be sales tax on a transaction. If a seller told a customer that tax was collected on a sale, that tax must be remitted to the state — full stop. If tax was collected in error (meaning no tax was actually owed on that transaction), it must instead be refunded to the customer who paid it. Keeping either kind of "tax" for the seller's own benefit is unjust enrichment, and Rule 3.3(a) confirms the Comptroller will require the Amount be remitted to the state or refunded to the customer.

The letter then walks through the actual exposure: Tax Code § 111.016 treats any amount a person collects as tax as held in trust for the state — the collector is liable for the full amount plus penalties and interest, and any individual (officer, manager, director, employee, or partnership member) who controls or supervises collecting or paying over that tax and willfully fails to do so becomes personally liable as a "responsible individual," a liability that survives even if the business later dissolves; Travis County district courts have exclusive jurisdiction over such suits. Beyond that trust-fund civil exposure, § 151.703 imposes escalating penalties for late filing or payment (5% initially, another 5% if more than 30 days late, minimum $1, plus interest starting 60 days after the due date); § 151.708 makes selling as a retailer without a required permit (or after one is suspended) a misdemeanor punishable by up to a $500 fine, with each day of continued violation a separate offense; and § 151.710 is a catch-all misdemeanor (up to $500 fine) for any other violation of the sales tax chapter.

What this means for you

Retailers and any business that collects sales tax

Money you collect as "tax" is never really yours — it's held in trust for the state the moment you collect it. If you mistakenly collected tax that wasn't actually due, the fix is to refund the customer, not to keep it or simply not remit it. Either mishandling can trigger the unjust-enrichment doctrine.

Business owners, officers, and managers with responsibility for tax remittance

Personal liability is real here: if you control or supervise your company's tax collection or payment function and willfully fail to remit what was collected, you become personally liable as a "responsible individual" under § 111.016 — and that liability doesn't disappear if the company dissolves.

Accountants and tax professionals

This letter is a useful, compact summary of the full penalty stack for sales tax noncompliance: trust-fund/responsible-individual civil liability (§ 111.016), escalating late-filing/late-payment penalties (§ 151.703), and two distinct misdemeanor criminal provisions (§§ 151.708, 151.710) — worth having on hand when advising a client on collection and remittance discipline.

Common questions

Q: What is "unjust enrichment" in the sales tax context?
A: A seller keeping any amount represented to be tax on a sale, instead of remitting it to the state (if properly collected) or refunding it to the customer (if collected in error).

Q: Can an individual officer or manager be held personally liable for unremitted sales tax?
A: Yes — under § 111.016, anyone who controls or supervises the collection or payment of the tax and willfully fails to pay it becomes personally liable as a "responsible individual," even after the business dissolves.

Q: What are the civil penalties for late filing or payment?
A: 5% of the tax due, plus another 5% if more than 30 days late (minimum $1 penalty), plus interest starting 60 days after the due date, under § 151.703.

Q: Are there criminal penalties for sales tax violations?
A: Yes — selling as a retailer without a required permit is a misdemeanor punishable by up to $500 per day of violation (§ 151.708), and other violations of the sales tax chapter carry a general misdemeanor penalty of up to $500 (§ 151.710).

Q: Can other taxpayers rely on this exact letter?
A: No. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10); confirm your own facts with a tax professional.

Citations and references

Statutes and rules:

• Tex. Tax Code § 111.016 (payment to the state of tax collections; trust and responsible-individual liability)
• Tex. Tax Code § 151.703 (failure to report or pay tax; escalating penalty and interest)
• Tex. Tax Code § 151.708 (selling without permit; criminal misdemeanor)
• Tex. Tax Code § 151.710 (general criminal penalty; misdemeanor)
• 34 Tex. Admin. Code § 3.3(a) (unjust enrichment)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200009659L

Original ruling text

Date: September 6, 2000

From: Lindey Osborne

To: **

Subject: unjust enrichment

Dear **:

Thank you for your recent email. You asked what unjust enrichment means,
whether is it illegal, and if it is, what is the penalty?

The general principal of unjust enrichment is that one person may not enrich
himself at the expense of others. Regarding sales tax, a seller is guilty of
unjustly enriching himself, at the expense of the state or his customer, if he
keeps any amount represented to be tax on a sales transaction. If a seller
represents to a purchaser that tax was collected on a sales transaction, the
seller must remit the tax to the state. If the tax was collected in error, the
tax must be refunded to the purchaser.

A person guilty of unjust enrichment may be subjected to following sections of
the tax statute:

Section 111.016. Payment to the State of Tax Collections

(a) Any person who receives or collects a tax or any money represented to be a
tax from another person holds the amount so collected in trust for the benefit
of the state and is liable to the state for the full amount collected plus any
accrued penalties and interest on the amount collected.

(b) With respect to tax or other money subject to the provisions of Subsection
(a), an individual who controls or supervises the collection of tax or money
from another person, or an individual who controls or supervises the
accounting for and paying over of the tax or money, and who willfully fails to
pay or cause to be paid the tax or money is liable as a responsible individual
for an amount equal to the tax or money not paid or caused to be paid. The
liability imposed by this subsection is in addition to any other penalty
provided by law. The dissolution of a corporation, association, limited
liability company, or partnership does not affect a responsible individual's
liability under this subsection.

(c) The district courts of Travis County have exclusive, original jurisdiction
of a suit arising under this section.

(d) In this section:

(1) "Responsible individual" includes an officer, manager, director, or
employee of a corporation, association, or limited liability company or a
member of a partnership who, as an officer, manager, director, employee, or
member, is under a duty to perform an act with respect to the collection,
accounting, or payment of a tax or money subject to the provisions of
Subsection (a).

(2) "Tax" includes any tax or money subject to the provisions of Subsection
(a), including the penalty and interest computed by reference to the amount of
the tax or money.

Section 151.703. Failure to Report or Pay Tax

(a) A person who fails to file a report as required by this chapter or who
fails to pay a tax imposed by this chapter when due forfeits five percent of
the amount due as a penalty, and if the person fails to file the report or pay
the tax within 30 days after the day on which the tax or report is due, the
person forfeits an additional five percent.

(b) The minimum penalty provided by Subsection (a) of this section is $1.

(c) A delinquent tax draws interest beginning 60 days from the due date.

Section 151.708. Selling Without Permit; Criminal Penalty

(a) A person or officer of a corporation commits an offense if the person or
corporation engages in business as a retailer in this state without a permit
required by this chapter or after the permit is suspended.

(b) An offense under this section is a misdemeanor punishable by a fine of not
more than $500.

(c) A separate offense is committed each day that a person or officer of a
corporation violates this section.

Section 151.710. General Criminal Penalty

Except as otherwise provided by this chapter, any violation of this chapter is
a misdemeanor punishable by a fine of not more than $500.

Rule 3.3(a) regarding unjust enrichment states:

If amounts are collected as tax in transactions on which tax is not due, the
Comptroller will require, under the doctrine of unjust enrichment, that these
amounts be remitted to the State or be refunded to the customers from whom they
were collected.

This opinion is based on the facts presented. Other facts, though similar, may
result in different answers.

If you have additional questions, I'll be glad to help you. My e-mail address
is . My direct line is (512) 475-0037. The
toll-free number is 1-800-531-5441, ext. 5-0037.

Sincerely,

Lindey Osborne
Tax Policy Division