Tax Refund Cases Won’t Lower Consumer Prices
The Supreme Court may rule on a major legal challenge to President Donald Trump as soon as Friday. If these costs are reduced, importers hope to recover billions of dollars.
Depending on the decision, the Trump administration could be ordered to return more than $133 billion in tax dollars, according to Reuters. But experts say actually taking that step would be difficult, and everyday Americans are unlikely to benefit. During oral arguments in November, Judge Amy Coney Barrett bluntly asked a lawyer representing groups opposing the tariffs: “If you win, tell me how the restitution process is going to work. Is it going to be total chaos?”
The case involves a set of charges based on a 1977 law – the International Emergency Economic Powers Act, or IEEPA. Groups suing Trump’s trade policies say the law doesn’t give Trump broad authority to impose tariffs, and is therefore invalid.
Meanwhile, retailers such as Costco and Crocs have filed their own lawsuits against the administration, hoping to increase their chances of getting refunds if the Supreme Court invalidates Trump’s tax.
That’s “if,” but in total, more than 700 companies have started tax refund cases at the International Trade Court, according to Ashley Akers, a lawyer at Holland & Knight.
It is not clear if any refunds will be issued. Even if Trump’s tariffs are overturned, Siddartha Rao, an attorney at Hoguet Newman Regal & Kenney, explains that the court would basically “say, ‘We overturn the tariffs and they can’t be put forward, but we don’t affect anything that was put forward.’
Will the Supreme Court allow tax refunds?
If the Supreme Court clears the way for restitution, that process may take several forms, and judges may send important questions back to lower courts for resolution.
“We won’t know exactly the process or whether the idea will come out on Friday,” Akers said.
In one case, Customs and Border Protection could create a “simpler” online refund process, he said. Alternatively, businesses seeking refunds may be ordered to submit “summary corrections” or “protests,” which are existing administrative procedures for correcting tax payments, Akers explained.
These are all just opinions, however.
“The Supreme Court will not get into the weeds of handling it,” said Rao. “They will send it back to the Federal Circuit, which will kick it back to the Court of International Trade, and it will be up to the trial judges to find a process for the importers to get their refunds.”
In any case involving a refund, the money will go back to the importers who paid the tax. No matter what happens, consumers likely won’t receive checks from the federal government.
Yes, American buyers paid slightly higher prices because of the cost, but a potential claim for refund can only be obtained from the importer of record who paid the tax.
Akers notes that if a tax refund occurs, “there is a chance that the company will strengthen the customer and pass on the refund.” But don’t count on it.
The Supreme Court’s decision to cut prices can only lead to lower prices for consumers in the form of lower prices going forward. Companies will no longer need to pass the cost of the tax on to customers, and that will be seen as a win for consumers and tax-sensitive businesses.
Why companies sue for tax refunds
Some companies that have sued the administration are concerned about tax payments that are being “dismissed,” or completed, by Customs and Border Protection. Remedies for importers are generally severely limited after that cut-off date, which usually occurs 314 days after payment.
Last month, the Court of International Trade tried to allay concerns, confirming that tax registrations could be revoked, or returned, if tariffs were deemed illegal by the Supreme Court.
Customs and Border Protection also announced Tuesday that it is modernizing its refund process to be electronic — another sign that the federal government may be looking at the possibility of an unprecedented refund situation.
Trump administration officials including Treasury Secretary Scott Bessent have indicated that the tax rollback would be “bad” for the Treasury. But Bessent also pointed to the administration’s backup plan to issue new rates for various reasons if the Supreme Court lowers Trump’s IEEPA rates, meaning the saga isn’t ending anytime soon.
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