United States

Colorado: Retailer Must Refund Sales Taxes Paid on Shipping Charges When Goods Returned

Sep 19, 2016
From KPMG TaxWatch

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The Colorado Department of Revenue has issued a General Information Letter addressing when a retailer must refund sales tax collected on mandatory shipping charges when the shipping charge itself is not refunded. Under Colorado law, sales tax applies to the full purchase price of goods, including any mandatory or non-separately stated shipping charges. The taxpayer, a retailer, made sales of goods to Colorado purchasers and collected sales tax (as required) on the mandatory shipping charges. When items were returned to the taxpayer, it refunded the purchase price of the items, but not the shipping charges. The Department of Revenue concluded that when the retailer refunds the full purchase price for tangible personal property, the shipping charge becomes a separate and separable transaction. As such, the shipping is no longer subject to sales tax, and the retailer must refund the customer any sales tax paid on the shipping charges. Please contact Steve Metz at 303-382-7177 with questions on GIL 16-005.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.