Why Vendors Provide an Assignment of Rights (AOR) for Sales Tax Refunds

An Assignment of Rights (AOR) is a legal document through which a vendor assigns its right to request a refund of overpaid sales tax to its customer. This is used in cases where the vendor collected and remitted the tax to the state, but the customer was the party that overpaid due to an exemption, resale, or other qualifying reason.

Why is the AOR Necessary?

• Legal Ownership of the Tax Refund Claim
• Under most state tax laws, only the party who remitted the tax to the state (i.e., the vendor) has the legal right to request a refund.
• Even though the customer bore the cost, the vendor is the legal taxpayer of record because they filed the sales tax return and paid the state.

• Allowing the Customer to File the Claim
• The Assignment of Rights allows the customer to "step into the shoes" of the vendor.
• With this assignment, the state will accept the refund request from the customer, even though the tax was technically paid by the vendor.

• Vendor Cooperation Avoids Duplicate Claims
• It ensures that only one refund claim is filed and avoids situations where both vendor and customer try to claim the same tax refund.
• States often require proof that the vendor will not seek a refund separately.

• Compliance with State Revenue Department Procedures
• Many states (e.g., Texas, California, Florida, New York) have specific forms and procedures that require an AOR or similar documentation when a customer seeks a refund for sales tax paid to a vendor.
• These are required to maintain clear audit trails and protect against fraudulent refund claims.

When is the AOR Typically Used?

• A customer believes they were wrongly charged sales tax on an exempt purchase (e.g., resale, manufacturing equipment).
• The vendor is unwilling or unable to file the refund on the customer's behalf.
• The customer is seeking a direct refund from the state rather than going back to the vendor.

Key Takeaway

Without an AOR, the state will usually reject a refund request from a customer because the legal right belongs to the vendor. The AOR document is the formal mechanism to transfer that right and allow the refund process to move forward.

Let us know at Transportation Tax Consulting and we can create a custom Assignment of Rights template drafted for a specific state or transaction.