Home Depot disputes sales tax
posted by admin in Home DepotRhode Island tax officials are engaged in a nasty legal dispute with Home Depot over state sales-tax refunds. That’s what this controversy is all about. It involves the Home Depot credit card, which is issued by a bank, not by Home Depot itself.
When you buy something at Home Depot, using the Home Depot credit card, the credit card issuer pays Home Depot for the merchandise and the sales tax, less a discount to compensate the credit card issuer.
It is Home Depot that pays the sales tax to the Division on credit sales, and it is Home Depot that suffers the economic loss resulting from customers who subsequently refuse to pay their accounts, the company asserted in court documents.
But when a Home Depot credit card is involved, the transaction isn’t really between the consumer and Home Depot, but between the consumer and the bank that issued the credit card, state tax officials assert.
So Home Depot can’t treat the transaction as a bad debt; only the credit card issuer can. And because the credit card issuer isn’t a retailer, it doesn’t qualify for a refund of the sales tax paid, state lawyers argue.
In such situations, the state keeps the sales tax revenue; the retailer - and the bank that issued the Home Depot credit card - are out of luck when it comes to sales-tax refunds.
It may seem a fine point, but there’s a lot at stake. Home Depot - which bills itself as the world’s largest home-improvement retailer - applied to the Rhode Island Division of Taxation in 2003 for a refund of nearly $100,000 in sales tax paid on items bought at Home Depot stores - with credit cards carrying the Home Depot brand - over a three-year period ended in July 2003.
In this case, Home Depot long relied on Monogram Credit Card Bank of Georgia to issue credit cards - carrying the Home Depot brand - to certain Home Depot customers.
Whether Home Depot owns its own accounts or partners with a financial institution, however, should be irrelevant for determining whether Home Depot is entitled to a sales tax refund under Rhode Island sales tax rules, the company said in court documents.
No legal or equitable principle authorizes the Division [of Taxation] to retain sales tax under these circumstances, the company said. As a result, Home Depot says it should be entitled to a refund.
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