Uncollectible receivables; deduction
Sec. 9. (a) In determining the amount of state gross retail and use
taxes which a retail merchant must remit under section 7 of this
chapter, the retail merchant shall, subject to subsections (c) and (d),
deduct from the retail merchant's gross retail income from retail
transactions made during a particular reporting period, an amount
equal to the retail merchant's receivables which:
(1) resulted from retail transactions in which the retail merchant
did not collect the state gross retail or use tax from the
purchaser;
(2) resulted from retail transactions on which the retail
merchant has previously paid the state gross retail or use tax
liability to the department; and
(3) were written off as an uncollectible debt for federal tax
purposes under Section 166 of the Internal Revenue Code
during the particular reporting period.
(b) If a retail merchant deducts a receivable under subsection (a)
and subsequently collects all or part of that receivable, then the retail
merchant shall, subject to subsection (d)(6), include the amount
collected as part of the retail merchant's gross retail income from
retail transactions for the particular reporting period in which the
retail merchant makes the collection.
(c) This subsection applies only to retail transactions occurring
after June 30, 2004. The right to a deduction under this section is
assignable only if the retail merchant that paid the state gross retail
or use tax liability assigned the right to the deduction in writing.
(d) The following provisions apply to a deduction for a receivable
treated as uncollectible debt under subsection (a):
(1) The deduction does not include interest.
(2) The amount of the deduction shall be determined in the
manner provided by Section 166 of the Internal Revenue Code
for bad debts but shall be adjusted to exclude:
(A) financing charges or interest;
(B) sales or use taxes charged on the purchase price;
(C) uncollectible amounts on property that remain in the
possession of the seller until the full purchase price is paid;
(D) expenses incurred in attempting to collect any debt; and
(E) repossessed property.
(3) The deduction shall be claimed on the return for the period
during which the receivable is written off as uncollectible in the
claimant's books and records and is eligible to be deducted for
federal income tax purposes. For purposes of this subdivision,
a claimant who is not required to file federal income tax returns
may deduct an uncollectible receivable on a return filed for the
period in which the receivable is written off as uncollectible in
the claimant's books and records and would be eligible for a bad
debt deduction for federal income tax purposes if the claimant
were required to file a federal income tax return.
(4) If the amount of uncollectible receivables claimed as a
deduction by a retail merchant for a particular reporting period
exceeds the amount of the retail merchant's taxable sales for
that reporting period, the retail merchant may file a refund
claim under IC 6-8.1-9. However, the deadline for the refund
claim shall be measured from the due date of the return for the
reporting period on which the deduction for the uncollectible
receivables could first be claimed.
(5) If a retail merchant's filing responsibilities have been
assumed by a certified service provider (as defined in
IC 6-2.5-11-2), the certified service provider may claim, on
behalf of the retail merchant, any deduction or refund for
uncollectible receivables provided by this section. The certified
service provider must credit or refund the full amount of any
deduction or refund received to the retail merchant.
(6) For purposes of reporting a payment received on a
previously claimed uncollectible receivable, any payments
made on a debt or account shall be applied first proportionally
to the taxable price of the property and the state gross retail tax
or use tax thereon, and secondly to interest, service charges, and
any other charges.
(7) A retail merchant claiming a deduction for an uncollectible
receivable may allocate that receivable among the states that are
members of the streamlined sales and use tax agreement if the
books and records of the retail merchant support that allocation.
As added by Acts 1980, P.L.52, SEC.1. Amended by P.L.257-2003,
SEC.30; P.L.81-2004, SEC.7.
Last modified: May 28, 2006