Administrative Code

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Virginia Administrative Code
Title 23. Taxation
Agency 10. Department of Taxation
Chapter 210. Retail Sales and Use Tax

23VAC10-210-3080. Returned goods.

A. Generally. A dealer may deduct from gross sales any portion of the sales price of tangible personal property returned by a customer provided that such amount has been refunded to or credited to the account of the purchaser. Adequate records must be kept to disclose the essential facts.

B. Returns before tax paid by dealer. If a dealer refunds or credits to a customer's account all or any portion of the sales price of returned goods and has not yet paid the sales tax to the department, such portion of the sales price may be deducted from gross sales by the dealer in the appropriate place on his return for the period.

Example 1. Customer A purchases a sweater from Dealer B for $20 and pays to B the appropriate $1.06 sales tax. A returns the sweater the same day and B refunds $21.06. If the sale was included in gross sales for the month, B may deduct the $20 sales price of the sweater.

C. Returns after tax paid by dealer. If a dealer refunds or credits to a customer's account all or any portion of the sales price of returned goods after the dealer has paid the tax on the goods to the department, such portion may be deducted from gross sales on the dealer's return for the period in which the refund was made or credit given.

Example 1. In December Customer C purchases a bed from Dealer D for $700 and pays the $37.10 tax. C returns the bed to D in January and D credits C's account for $737.10. In reporting gross sales for January, D may deduct the $700 sales price of the bed reported in a previous month.

D. Refund or credit for returned goods. If a dealer as described in subsection C of this section has insufficient gross sales during the period in which goods are returned or a refund or credit issued to absorb the amount of the sales price of the returned goods, the dealer may carry the deduction forward as a credit against gross sales until used. If any portion of such credit has not been used by the time a dealer ceases business or if a dealer is no longer engaged in making retail sales, he may request a refund for any portion of the unused credit for returned goods. The amount of refund will be the net amount of tax remitted, therefore, if a dealer deducted dealer's discount in filing his original return, such discount shall similarly be deducted from the amount to be refunded. The following example illustrates this concept.

Example 1. Customer E purchases equipment from Dealer G in January for $10,000 and pays the $530 sales tax. The transaction is reported on G's January sales tax return which is filed timely. E returns the equipment in April and G refunds to E $8,000 of the sales price and the applicable tax of $424. G's gross sales for April are only $5,000, therefore, only $5,000 of the amount refunded may be used as a credit. G goes out of business on April 30 and applies for refund of the tax attributable to the remaining $3,000 of sales price which was refunded. G will be issued a refund of $155.40 computed as follows:

(Sales Price X 5.3% tax) ‑ dealer's discount = Refund ($3,000 X 5.3% tax) ‑ (1.6% X $90) = $157.56

E. Sales of returned goods. When any returned tangible personal property is resold, the sale is subject to the sales tax.

F. Hampton Roads Region and Northern Virginia Region. The total rate of the state and local sales and use tax in localities that fall within these regions is 6.0% (4.3% state, 0.7% regional, and 1.0% local). The provisions of this section apply to transactions sourced to the Hampton Roads Region and the Northern Virginia Region, mutatis mutandis. For definitions of the "Hampton Roads Region" and the "Northern Virginia Region" see 23VAC10-210-2070.

Statutory Authority

§ 58.1-203 of the Code of Virginia.

Historical Notes

Derived from VR630-10-93; revised January 1, 1979; amended, eff. January 1, 1985; Virginia Register Volume 25, Issue 11, eff. March 4, 2009; Volume 32, Issue 22, eff. September 12, 2016.

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