NORFOLK – Gov. Tim Kaine’s message was clear.  "Any store owner, retail employee, who's ripping people off on these items that are non-taxable deserves to be punished," he said in May.

That’s when a 13News Money Watch Investigation found more than 1,200 major retailers wrongly charging sales tax on non-prescription drugs.

Now, it appears the state has largely dismissed those findings, calling the amount that people were overcharged “a hiccup.”

Meantime, many retail stores and pharmacies are still charging tax on tax-free items such as medicated mouthwashes, powders and shave creams, as well as some first-aid products, acne treatments and eye drops.

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13News has learned the state’s investigation consisted largely of simply contacting retailers 13News Investigators uncovered in our report -- just a handful of Virginia’s 200,000 retailers.

A spokesman for the governor concluded what 13News Investigators uncovered were "small mistakes," "rare," "not a significant amount of money."

In recent weeks, 13News purchased medicated mouthwash, shaving cream, powder and lip balm from Family Dollar, Dollar General, CVS and Raceway stores and again was wrongly charged sales tax.

The state says retailers know the law and they are left to largely police themselves.

At Bennett’s Creek Pharmacy in Suffolk, the manager told us she was aware of the law and our investigation, but we still paid tax on medicated mouthwash and powder and Neosporin -- all tax-free items.

The store’s owner is State Delegate Chris Jones.

"It's embarrassing, but it happens,” he said.

Jones even sponsored legislation to get the tax-cutting law on the books 10 years ago.

"Unfortunately, in this situation, what should have been done was not done and there’s no excuse for it," said Jones.

With thousands of products on the market today, Jones says it can be tough for computer systems to properly code them.

So, who gets your money? Susan Milhoan, president of the Retail Alliance, says retailers don’t benefit.

“If you were to error on one side or the other, you don’t want to short customers, but you don’t want to mess with the state,” she says.

Just how much Virginians have overpaid in sales tax on non-prescription drugs over the past decade is a number the state says it can’t calculate.

So far, the number of stores where we have found errors has now grown to more than 2,000.

Not once in our spot check, however, where we bought hundreds of dollars worth of products, did a retailer fail to charge us tax on a taxable item.

Milhoan says customers who notice errors can ask for a refund of the tax.

"What we're trying to tell our retailers is customer service makes customers come back over an over again. Just get it right. If it’s a mistake, make it right," she says.

After 13News Investigators informed the Retail Alliance of the findings, Milhoan sent an e-mail to its members reminding them of the 1998 law.  Also, a notice to retailers was published in the June edition of the Retail Merchants Association's monthly newsletter.

Since we began asking questions four months ago, a majority of stores have corrected errors.

Family Dollar, Raceway and Dollar General failed to return our calls.

CVS Pharmacy statement:

“Our register system is programmed here in the corporate offices in RI.  

“We looked into this issue this morning and discovered that VA tax regulations have two conflicting sections: one states that “shaving products are taxable” and another that “(medicated) shaving products” are exempt.  We were operating under the former section.  We have corrected our system to recognize that medicated shaving cream is tax-exempt.  Our registers will update with the correct information at midnight tonight.  We apologize for the confusion, thanks for bringing this to our attention."    

Thanks,

Mike  

Mike DeAngelis

Director, Public Relations - CVS/pharmacy                                                  

CVS Caremark Corporation