006.05.212-GR-81.1. REFUNDS:
AR ADC 006.05.212-GR-81.1Arkansas Administrative Code
Ark. Admin. Code 006.05.212-GR-81.1
006.05.212-GR-81.1. REFUNDS:
Example: Taxpayer A reports its gross receipts for the month of June 2004 as $132,000.00 and calculates its tax liability based on that amount. Taxpayer subsequently discovers that its gross receipts for June 2004 were actually $123,000.00. The only information required to correct the error is a change, within the limitations period provided by law, to the gross receipts amount. Taxpayer files an amended return for June 2004 correctly reporting its gross receipts as $123,000.00 and calculates the tax liability based on $123,000.00. Taxpayer is entitled to a refund of the tax applicable to the $9,000.00 difference in gross receipts; or
Example: Taxpayer collects tax from its customer on the sale of a piece of machinery that sells for $85,000.00. Taxpayer reports and remits the tax on $85,000.00. The customer obtains an opinion that the machinery is exempt from tax as manufacturing machinery. Taxpayer refunds the tax to the customer and files a verified claim for refund that supplies the information necessary for DFA to determine whether Taxpayer is entitled to the refund claimed. (See GR-81.1(C) and GR-81.1(D) regarding claim requirements.)
2. “Claimant” shall mean the person or entity that files a refund request (claim for refund). The claimant may be the taxpayer (the vendor or a direct pay permit holder), or the person or entity to whom the taxpayer has assigned its claim (assignee, usually the customer). A representative of the claimant who has been granted the Power of Attorney to act on the behalf of the claimant may submit a Claim for Refund. For a consumer use tax claim, the customer who reported and remitted consumer use tax directly to the state rather than to the vendor may file a Claim for Refund.
2. Requirements for Claim. Form 2004-6 is incorporated into and adopted as a part of this regulation and is required to be used by every claimant filing a claim for refund other than an amended return. The form provides a method and format to comply with the requirements for a claim for refund. The form is available on the Internet at http://www.arkansas.gov/dfa/excise_tax_v2/et_su_forms.html. The information listed below in items (a) through (f) of this section shall be required in order to process any claim for refund other than an amended return.
3. Deficiencies in Claim. If the director determines that the information supplied in the claim for refund substantially complies with the claim requirements, the claim will be considered to be filed timely for all periods within the statute of limitations as of the date the claim is filed. However, a refund claim that substantially complies with the claim requirements may lack additional information required by the director to process the claim. The director will send a letter to the claimant that states that the claim for refund is considered timely, explains what additional information is required, and gives the claimant a reasonable time to supply the information. If the information is not supplied within the time allowed, that part of the claim relating to the requested information will be denied.
4. Treatment of Deficient Claims. Any claim that does not contain the information listed in GR-81.1(C)(2) and as required on Form 2004-6 will be considered not to be in substantial compliance with the claim requirements. The director will send a letter to the claimant stating that the claim does not meet the claim requirements. The claimant may resubmit the claim, adding the necessary information to substantially comply with the requirements. The statute of limitations shall continue to run on the refund claim until a claim is filed that substantially complies with the claim requirements. Only those taxes that are within the statute of limitations at the time a claim that is in substantial compliance with the claim requirements is submitted will be refunded. The statute of limitations will not relate back to the filing date of a prior claim that was not in substantial compliance with the claim requirements.
D. PREPARATION AND PRESENTATION OF REFUND REQUEST. To facilitate the prompt and efficient review and analysis of refund requests, it is necessary that refund requests be presented in an orderly and understandable fashion. Toward that end, all sales and use tax refund claims should be organized as follows:
1. Refund Claims Made by Vendors. The most common refund request occurs when a vendor requests a refund of taxes previously remitted to the state. In these circumstances, the vendor sells the product or service, collects the tax from the customer, remits the tax to the state, and subsequently obtains information that the original transaction was not taxable or the amount of tax originally paid was incorrect. In this situation, the vendor will refund the tax to the customer and request a refund of the tax from the state. A vendor seeking a refund under these circumstances must present documentation supporting the refund claim in the following manner:
2. Refund of Taxes Paid Directly by the Purchaser. In some situations, the customer is responsible for paying sales and use tax directly to the State of Arkansas. This typically occurs when a customer pays use tax on purchases made from outside the state or the purchaser holds a direct-pay sales and use tax permit. When a purchaser requests a refund of sales or use tax paid directly to the State of Arkansas, the refund claim should be organized in the following manner:
3. Vendor Assignment Refund Claims. Occasionally, a vendor will assign the vendor's right to a tax refund to the customer and the customer will request that DFA make a refund directly to the customer. In this circumstance, it is necessary to provide adequate safeguards to ensure that DFA refund only taxes that have actually been received by the state from the vendor. Refund claims made by customers as a result of a vendor assignment must be in the following form to provide these safeguards and to expedite processing of these refund claims:
E. STATUTE OF LIMITATIONS. The statute of limitations that applies to tax refunds is found at Ark. Code Ann. § 26-18-306. Refund claims are within the statute of limitations if they are filed within three (3) years from the date the return was filed or two (2) years from the date the tax was paid, whichever is later.
1. Refunds Made Directly to the Assignee (customer). For sales tax, the customer is not the “taxpayer,” because the customer is not liable to report and remit the tax. A customer who pays tax to a vendor should request a refund of tax erroneously paid from the vendor. After the vendor refunds the tax to the customer, the vendor can then file a claim for refund of the tax refunded to the customer. However, under the common law principles of assignment, the vendor can legally assign its right to refund to the customer (assignee).
3. Right of Assignee to Refund No Greater Than Right of Taxpayer. If the vendor would not be entitled to a refund, then its assignee is not entitled to a refund. Under Arkansas law, an assignee of contract rights has no greater rights against the debtor than did the assignor. Tucker v. Scarbrough, 268 Ark. 736, 740, 596 S.W.2d 4 (1980). The confidentiality provisions of Ark. Code Ann. § 26-18-303 prohibit the Department from disclosing to the assignee facts concerning why the vendor is not entitled to a refund. If applicable, the Department will notify the claimant that the claimant must request the refund directly from the vendor.
H. ELECTRONIC RECORDS. The age of technology has afforded many companies the ability to conduct purchasing activities in a “paperless” environment. There may be times when “paper documents” are not available and can not be included as required with the Claim for Refund. For the purposes of this rule, “paperless” will mean that a traditional “hard copy invoice or paper invoice” cannot be produced, does not exist, and has not been issued from the vendor to the purchaser. When this situation occurs, the claimant is to:
2. The claimant will substitute documentation that will provide the necessary information to substantiate that tax was paid to a vendor or was accrued by the taxpayer. This information should include the date of purchase, vendor name and address, transaction tracking number used by vendor and purchaser, description of item purchased, dollar amount paid for the item purchased, and the amount of tax that was accrued by the purchaser or paid to the vendor.
1. Administrative hearing. The claimant has sixty (60) days following the issuance of a written denial of a claim to file a protest of the denial and request an administrative hearing. An assignee shall have the same rights to hearing that the taxpayer would have under the Arkansas Tax Procedure Act.
Credits
AUTHORITY: Ark. Code Ann. § 26-18-507
Current with amendments received through May 15, 2024. Some sections may be more current, see credit for details.
Ark. Admin. Code 006.05.212-GR-81.1, AR ADC 006.05.212-GR-81.1
End of Document |