Besides being an entrepreneur, I also served as bookkeeper for my wife’s gardening business. When we first registered the business with the State of Virginia, I set up a sales tax resale certificate with the state, which is required of any business that sells goods and services to the public. When I set it up, I talked with someone in the Tax Dept. to clarify what we had to collect taxes for. To my surprise, she told me that we had to collect sales tax on labor for jobs we performed for customers… weeding, planting, etc. That was different from what we’d previously experienced in Connecticut, but I figured it must be something different about Virginia law.

To make a long story short, we discovered three years later that we had been paying these taxes in error. Worse yet, we hadn’t been charging her customers for taxes on labor. Rather, we’d been paying it out of the labor fees she charged. In other words, we were settling for less than her regular hourly rate in order to satisfy the tax man.

Once we discovered that we’d been given the wrong information, I contacted the State again to find out how we could get the money back. If you’ve ever tried getting money out of a government, you know how difficult it can be. I was first told that I had to fax in a letter to a certain fax number. I did that, but didn’t hear anything back. Six months later, I finally got around to doing a followup. They claimed they had never received the first fax, even though I had kept copies of the letter and of the fax transmission report. They wanted me to fax it again. So I did.

This time, they got back to me and asked me why I hadn’t refiled the sales tax returns. I said they hadn’t told me I had to do that. They said, yup, I had to do that. So I spent the next week preparing amended returns on over 30 prior sales tax returns. What a job!

Two weeks later, we got letters saying that all our requests for refunds had been denied.

Around this time, I had read The Secret and was taking my first baby steps in applying it. I decided to apply it with the State of Virginia. I called back after firmly deciding in my mind that somehow, although I couldn’t imagine how, but somehow they were going to decide to honor our refund request for overpaid taxes.

Prospects for the approval looked good at first, until an auditor stepped in and denied the claim again. This would have pissed most people off, and it certainly would have pissed me off prior to reading The Secret, but instead, I decided to treat the auditor and the Tax Department people as if they were just people trying to do their jobs as best they could.

After a number of phone calls, I managed to get a return phone call from the senior auditor who had turned down my request. He said he had denied it because really that money should go back to our gardening customers because they were the ones who had overpaid, not us. So if we wanted the refund, I had to prove we were going to give them the money. I made my case again that we had actually paid the money out of our labor revenue and not charged them extra. He asked if we had shown this on our invoices. We had. Each time we’d done work at, say $25 an hour, we had reduced the rate on the invoice so that when we added the sales tax back in, it would total $25. The auditor replied that that proved we owed the money to the customers, because we’d really only charged them $23 and change per hour, not $25. I was livid when I heard that, but I kept my cool. Instead of yelling at him, I asked him what should we have done instead? He said we shouldn’t have collected sales tax on labor. I replied that we only did that because the Tax Dept.’s customer service person had told us to do that nearly four years earlier. He said there was no proof of that, and anyway we had still charged the customer sales tax, so if we wanted a refund we’d have to give it to the customers. So I said, “Well, assume for the sake of discussion that the Tax Dept. person did give us the wrong information. Given the information we had, how should we have handled the sales tax returns?” He thought a minute, and said we should have not charged the customers any sales tax, then paid it directly out of our own pockets, so that the invoices would show that we didn’t charge the customers. I said, “But if we did that, wouldn’t the state say that we were failing to collect sales taxes?”

We went around and around, but it was clear that he wasn’t going to budge. So finally, I backed down, thanked him for his time, and prepared to hang up. He said I could still appeal to the Tax Commissioner, but I was pretty sure that wouldn’t get us anywhere. He agreed, and said he’d also talk with the manager for customer service to see if there was anything else they could do, but he wasn’t hopeful.

That’s the last I heard until about a month later. Out of the blue, I got a phone call from the auditor. He said he’d been thinking about it and decided that, “It would have worked out the same either way.” I’m not sure to this day what that means, but that’s what he said. The reason he said it is that it’s how he decided to change his mind. He was going to authorize the refund.

It still wasn’t simple after that. There were a number of false starts, because the sales tax department wasn’t used to giving refunds. They had no built-in mechanism for them. But by two months after that, we had received a total of $3,400 in refund checks for overpayment of sales taxes from the Virginia Dept. of Taxation.

Needless to say, I was shocked. You just don’t normally win battles like this with the government. They hold all the cards, and they usually win. To this day, I have no real idea why that auditor changed his mind. Nothing new had happened. He just decided to have a change of heart. I’ve never heard of that kind of thing happening before, and I very much doubt I’ll ever hear about it again, but it happened. And there’s no doubt in my mind that it happened because I was applying the Secret. I had decided I was going to attract that refund money back to us, even though the government of the Commonwealth of Virginia didn’t want to send it to us. The universe apparently took care of the matter for us!