- 4 -
Overpayments, Refunds, and Credit Balances
Some of petitioner’s customers remitted payment in excess of
the amounts they actually owed. In certain instances, the
customer would duplicate the required payment by first paying
pursuant to the product invoice and subsequently making payment
according to a monthly statement issued by petitioner prior to
the receipt of the customer’s initial payment.1 All overpayments
were applied to the customer’s account, generally producing a
credit balance in favor of the customer.
Petitioner’s marketing materials and shipping invoices
contained a statement of its return policy. The policy allowed
customers to return any item with which the customer was not
satisfied, for any reason, within 60 days of receipt.2 The
customer had the option of selecting a replacement, a full
refund, or a credit to his account. Product returns during the
1995 taxable year totaled $1,154,395, which amounted to
1 In their arguments, the parties distinguish between
overpayments and duplicate payments. We, however, see no
principled reason for distinguishing between the two.
Accordingly, in our opinion we shall refer only to customer
overpayments, which include overpayments of any amount.
2 In certain instances in which the customer was not
completely satisfied with the delivered product but nonetheless
intended to use it, petitioner would negotiate with the customer
an adjustment to the amount billed. Where the customer had
previously paid the full invoice amount, this adjustment would
result in a credit in favor of the customer. For purposes of
this opinion, we shall consider invoice adjustments as part of
customer returns.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011