Illinois – Procedures for Filing a Refund Claim

SALT Report 2729 – The Illinois Department of Revenue issued a general information letter regarding sales tax refunds for situations in which a customer provides an exemption certificate after a sale occurs.

The Taxpayer states that on occasion a customer will not tell them that they are exempt; or it might not provide an exemption certificate at the time of the sale. When this occurs, the customer will either short pay the invoice by the amount of tax due and provide an exemption certificate; or they pay the invoice in full, provide an exemption certificate, and request a refund from the Taxpayer.

The Taxpayer’s current procedure is to verify the certificate and grant the refund to the customer.  However, if the taxes have been remitted to the Department, the Taxpayer will offset the refund against its current sales and use tax liabilities.

Because the refund procedures vary by jurisdiction, the Taxpayer requested a ruling to help them establish internal administrative procedures that will meet the refund requirements for each state in which they are registered.

In its response, the Department stated that if a Taxpayer pays tax that is not due, either by mistake or error, the Taxpayer can file a claim for credit as provided by 86 Ill. Adm. Code 130.1501.  However, credits will only be given if the Taxpayer can verify that it has “borne the burden of the tax or has unconditionally repaid the tax to the purchaser from whom it was collected.”

In other words, if a purchaser erroneously pays tax to a retailer, only that retailer can file a claim for credit.  Further, the retailer is required to refund the tax to the purchaser before proceeding with a refund claim.  Once the retailer has refunded the tax, it can proceed with its claim for credit or refund with the Department.

In this particular case, the Department warns that even if the Taxpayer makes a refund to its customer, the Taxpayer is not legally authorized to make an adjustment on its sales tax return.  Rather, the Taxpayer must file a claim for credit as required by 86 Ill. Adm. Code 130.1501.

Further, the Department stated that only the Taxpayer can file a claim for credit or refund as there are no provisions that exist under Illinois sales tax laws for customers to file a claim directly with the Department; unless the customer is the one that initially remitted the tax to the Department.

For Further Information

Illinois Department of Revenue – General Information Letter ST 13-0029-GIL