Jacob Nussim (Bar-Ilan University, Faculty of Law) has posted On a Passé Defense: Unjust Enrichment and the Refund of Overpaid on SSRN.  Here is the abstract:

A producer pays commodity taxes on sold goods, realizing only later that the tax was unlawful. Yet, his claim for refund is denied. Tax authorities in the U.S. and elsewhere use the passing on defense to deny refunds of unlawfully levied taxes. The defense states that some or all of the unlawful tax the producer paid was passed on to consumers through goods’ price, and thus the producer would be enriched if refunded fully. The passing on defense is largely perceived in legal scholarship as a choice between unjustly enriching the producer by a full refund and unjustly enriching government by denying it. A balance is thus called for, e.g. by applying equity considerations. Accordingly, the application of the defense is vague and inconsistent. This paper shows, based on an economic reasoning, that a full refund of overpaid taxes does not enrich the producer-taxpayer. Since the defense does not serve to prevent producers’ enrichment, it should be rejected. Further, the paper demonstrates that, in fact, the passing on defense generates an additional tax in the market.