SALT Report 1195 – The Connecticut Department of Revenue Services has issued guidance regarding the treatment of sales and use taxes in connection with returns or exchanges of goods. It reflects 2011 legislative changes that impact:
- The sales and use tax treatment by retailers of customer returns of goods, exchanges, manufacturers’ warranties, retailers’ warranties, and trade-ins; and
- The procedures for replacing items of tangible personal property under manufacturers’ warranties or retailers’ warranties.
When a customer purchases a taxable item of tangible personal property and returns it to the retailer for cash or credit within 90 days from the date of purchase, the customer is entitled to a refund of sales tax at the rate that was applied to the original purchase. If the goods are returned after 90 days from the date of purchase or without a receipt, the customer is not entitled to sales tax on the refund.
Even Exchanges of Goods:
If a customer purchases a taxable item of tangible personal property from a retailer and exchanges it for an identical or similar item of tangible personal property priced the same, no tax is due on the exchange even if the original item is exchanged after 90 days from the date of purchase.
When a retailer gives credit to a purchaser for an item of tangible personal property traded in as part payment toward the purchase of a like kind item, the tax applies to the sales price or gross receipts of the item being purchased after the trade-in credit is deducted.
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