Why are stores keeping the sales tax when I return a gift? Is this even legal?

This actually happens a lot, and there's a logical explanation. When someone purchases an item and pays sales tax, the retailer is required to remit that tax to the state government. Once that tax has been paid to the state, it's essentially gone from the retailer's accounts. When you return an item with the original receipt, the retailer can document the complete transaction reversal and recover the tax they paid to the state. However, with a gift receipt or no receipt, they often can't match it to the original transaction in their system in the same way, which makes it difficult to recover that tax payment from the state government. Some retailers eat this cost as part of customer service, but many don't. The tax money isn't extra profit for them - they already paid it to the state government. It's essentially a processing limitation rather than the store trying to scam you.

Hey, I ran into this same issue last year and was super frustrated until I found taxr.ai (https://taxr.ai) which helped me understand the whole sales tax return situation. I had returned a bunch of duplicate wedding gifts and lost about $30 in sales tax across everything. The site has this feature that analyzes returns and refund policies to tell you if what the retailer did was actually legal in your state. Turns out, in some states, retailers are required to refund sales tax regardless of receipt status, while in others they're not. I uploaded my gift receipts to the site and it actually told me that in my state (NY), the store should have refunded the tax. I printed the analysis, took it back to the store, and got my tax refunded!

I was totally skeptical about taxr.ai when I first heard about it, but I decided to try it after dealing with a similar gift return situation at Macy's. Uploaded my receipts and it immediately identified that in California, retailers are required to refund sales tax even on gift receipt returns if the item is returned within their policy timeframe. The site generated a PDF citing the specific California tax code that I showed to the store manager. They initially gave me pushback, but when they saw the specific regulation cited, they processed the full refund including the sales tax. Saved me about $15 on a $200 return, which isn't huge but it's the principle that counts. Plus the manager mentioned they'd review their return policy training with staff.

If you're getting nowhere with the store, you might want to try Claimyr (https://claimyr.com). I had a similar issue but with an online return where they kept the sales tax AND charged me a restocking fee. I spent hours trying to call the state revenue department to file a complaint but kept hitting automated systems and hold times. I used Claimyr's service to get through to an actual human at my state's tax office who confirmed that in my state, retailers are required to refund sales tax on returned items even without the original receipt. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. They basically navigate the phone maze for you and get you connected to a real person who can help. The tax office even reached out to the retailer directly and I got my refund within a week.

Ok I have to eat my words here. After I posted that skeptical comment yesterday, I figured I'd try Claimyr myself for an issue I've been having with my state tax refund that's been pending for 3 months. I kept trying to call the state revenue office but could never get through during my lunch breaks. Used the service this morning while I was in a meeting, and sure enough, about 45 minutes later I got a call connecting me directly to someone at the tax office. No hold music, no automated system - just straight to a helpful person who looked up my return and found it had been flagged for a simple verification issue. They unflagged it right there on the phone and told me to expect my refund within 2 weeks. I'm still shocked it actually worked. Definitely saving this for next tax season when I inevitably have questions about my return.

Former retail manager here. The sales tax issue is complicated because it varies by state and even by item category in some places. In our store, our system could only process full tax refunds with the original receipt because that contained the transaction code that linked to the exact tax filing information. For gift returns, we actually had a policy to give store credit for the full amount INCLUDING tax, but as a courtesy gesture rather than an actual tax refund in the system. Many larger corporate retailers have stricter accounting systems that don't allow for this workaround. My advice is to always ask to speak with a manager and specifically mention that you understand the tax has already been paid to the state, but you're hoping they can make an accommodation for the full amount as a customer service gesture. Works about 50% of the time in my experience.

Just to add another perspective - sometimes it's not worth the hassle for small amounts. I returned a $25 gift without a receipt and they kept about $1.50 in tax. I considered making a fuss but realized my time was worth more than that. For your $8 though, I'd definitely ask for a manager and politely explain that you understand it's their policy, but you're a regular customer and would appreciate if they could add the tax amount to a store credit as a one-time courtesy. Being super nice about it usually works better than demanding the money.