Ala. Admin. Code r. 810-6-4-.01 - Accounts Charged Off (Bad Debts) And Repossessions
(1) The term "bad debt or uncollectible
account" as used in this rule shall mean any portion of the sales price of a
taxable item which the retailer cannot collect. Bad debts include, but are not
limited to, worthless checks, worthless credit card payments, and uncollectible
credit accounts. Bad debts, for sales and use tax purposes, do not include
finance charges, interest, or any other nontaxable charges associated with the
original sales contract, or expenses incurred in attempting to collect any
debt, debts sold or assigned to third parties for collection, or repossessed
property.
(2) The term
"repossessions" as used in this rule shall mean the repossession of taxable
items from the purchaser by the retailer because of the purchaser's default in
the payment of the amount owed.
(3)
The term "credit sale" shall include all sales in which the terms of the sale
provide for deferred payments of the purchase price. Credit sales include
installment sales, conditional sales contracts, and revolving credit
accounts.
(4) Sections
40-23-8 and
40-23-68(e),
Code of Ala. 1975, require that any person taxable
under the law having cash and credit sales may report the cash sales, and the
retailer shall include in each report all credit collections made during the
preceding tax reporting period and shall pay the taxes due on the cash sales
and the credit collections at the time of filing the tax report, but in no
event shall the gross proceeds of credit sales be included in the measure of
tax to be paid until collections of the credit sales have been made.
(5) In the event a retailer reports and pays
the sales or use tax on credit accounts which are later determined to be
uncollectible, the retailer may take a credit on a subsequent tax report or
obtain a refund for any tax paid with respect to the taxable amount of the
unpaid balance due on the uncollectible credit accounts within three years
following the date on which the accounts were charged off as uncollectible for
federal income tax purposes.
(6) If
a retailer recovers in whole, or in part, amounts previously claimed as bad
debt credits or refunds, the amount collected shall be included in the first
tax report filed after the collection occurred. (Sections
40-23-8 and
40-23-68(e))
(7) If taxable items upon which
sales or use tax has been paid by the retailer are repossessed, the retailer is
allowed a credit or deduction for that portion of the actual purchase price
remaining unpaid. The deduction must not include any nontaxable charges which
were a part of the original sales contract. Any payments made by the purchaser
prior to repossession must be applied ratably against the various charges in
the original sales contract.
Author: Dan Devaughn
Notes
Statutory Authority: Code of Ala. 1975, ยงยง 40-23-31, 40-23-83.
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