Virginia – Direct Marketer Eligible for Refund of Erroneously Collected and Remitted Tax

SALT Report 1216 – The Virginia Tax Commissioner ruled that a taxpayer who offers service reminders and service coupons through a direct marketing program is eligible for a Virginia sales and use tax refund.  The Taxpayer is a marketing and promotions company that purchases direct mail advertising programs from a third-party vendor and then resells those mailers to its customers in Virginia. The objective of the mailers is to promote automotive services at local dealerships.

When the Taxpayer bills their customers for direct mail advertising services the amount charged is 50% of the price listed on the mailer. The Taxpayer absorbs the difference in the discount coupon credit and does not receive reimbursement from a third-party. Therefore, when filing their sales and use tax returns, the Taxpayer was paying tax on the advertised list price, not the discounted price, collected from their customers.
The Virginia Department of Taxation ruled that the taxpayer is eligible for a refund if they:
  • Show that they have refunded the tax collected to their customers
  • File an amended sales and use tax return
  • File the amended return within three years from the due date of the original return
For Further Information:

Virginia Department of Taxation Ruling of Commissioner P.D. 11-176