USA Sales Tax Improperly collected

[stephaniecrocker]

I just identified some sales tax collection errors with my client who uses Shopify for their online retail store. These errors were with a special kind of order that their fulfillment staff would manually enter then ship separately. Their staff did not enter a shipping address so Shopify assumed fulfillment was at their Virginia address and therefore Richmond Sales Tax was collected from the customer despite the fact that some of these orders were shipped elsewhere.

(obviously, we need to refine this client's workflow for these types of orders but that is not the question)

I know that the sales tax does not belong to the client. My question is would you simply remit the sales tax to the appropriate Virginia agency or return the amount to the client?

Personally, in the interest of customer service, I would return to the customer, but I want an understanding of sales tax laws in Virginia.

Thanks!

 

[BIG E]

You don't make clear whether there are only overcharges of sales tax or whether there are undercharges as well.
Since every jurisdiction may have different sales tax rates, the only way to determine the actual status is to go through these "special kinds of orders" to reconstruct the actual liability vs amounts remitted (by jurisdiction). How long has this been occurring? Are there any reporting periods beyond the statute of limitations?
If you can't determine these things then perhaps you should contact the Va sales tax department to get advice as to how to proceed.

 

[stephaniecrocker]

I think I did when I stated that Richmond Sales tax was collected from the customer when it shouldn't have been, so all of these are overcollections. I hope that makes sense?

I have only found these errors for June 2023.

Since sales tax was due yesterday, i went ahead and remitted the correctly collected sales taxes to Virginia and will refund the customers today the sales tax they shouldn't have been charged in the first place. Although it's a bit of an embarrassment on behalf of my client, I think it is the cleanest and fairest solution. This money belongs to the customer, not the seller, and not the sales tax agency.

My question was is anybody aware of any compliance issues with this one time error? I may go ahead and contact the VA sales tax agency and make them aware of the situation and ensure I annotate the mistake correctly in the case of a future audit.

Thanks for the advice.

 

[BIG E]

If you're only talking about a 1 time situation that won't be repeated - then yes, refund the money to the customer.
It's not necessary to involve the Va Sales tax office.
By the way you described the situation it appeared that you had a miniature Amazon company where hundreds of transactions were involved over a number of sales tax filing periods.

 

[stephaniecrocker]

By the way you described the situation it appeared that you had a miniature Amazon company where hundreds of transactions were involved over a number of sales tax filing periods.

LOL "miniature Amazon company", this client does more than 2M in sales annually. Your comment has no relevancy to the question.

I can take a hit, but for others you might consider revisiting the concept of Forum etiquette and the goal of fostering a sense of community rather than make blanket accusations that don't help the spirit of learning. I've seen this in your other posts and it's not cool. I hope you take this to heart.

 

[BIG E]

Listen lady - I don't know who you are, and I don't care, but I'm not going to take any lip from you.
I am a former state sales tax auditor and in attempting to answer your rather vague ambiguous set of facts I was trying to help you.
You made a mountain out of a molehill as you presented a scenario as if it was a recurring error and big bucks were involved.
And what I post to others is none of your business. I don't need advice from you. I have helped many other posters on this forum for which they were extremely grateful. I will not be responding to any of your future posts even if I know the answer to your problem.