103 KAR 31:050. Returned merchandise.


      RELATES TO: KRS 139.010


      NECESSITY, FUNCTION, AND CONFORMITY: To interpret the sales and use tax law as it applies to returned or defective merchandise.


      Section 1. "Gross receipts" and "sales price" do not include the amount charged for merchandise returned by customers if:

      (1) The full sale price, including that portion designated as "sales tax" or "use tax" is refunded either in cash or credit; and

      (2) The customer, in order to obtain the refund or credit, is not required to purchase other property at a price greater than the amount charged for the property that is returned.


      Section 2. Refund or credit of the entire amount is deemed to be given when the purchase price, less rehandling and restocking costs, are refunded or credited to the customer.


      Section 3. The records of the taxpayer must clearly reflect and support the taxpayer's claim for all such deductions for merchandise returned for credit or refund.


      Section 4. Articles of tangible personal property that are repossessed by the seller may not be classed as returned goods. See 103 KAR 31:040 for repossessed merchandise.


      Section 5. Credits or refunds allowed by sellers to consumers on account of defects in merchandise sold may be excluded in the same manner as credits or refunds for returned merchandise. (SU-53; 1 Ky.R. 233; eff. 1-8-1975; TAm eff. 6-9-2009; TAm eff. 6-22-2016.)