Tax News

CCH (cch.taxgroup.com) reports:

  A retailer that participated in a private label credit card program with its customers that resulted in uncollectible accounts was not entitled to a bad debt refund of Indiana sales tax. As part of the program, the retailer conveyed information on the daily charges and sales tax to specified finance companies. These companies then remitted payment to the retailer for the charges and taxes and deducted certain service fees. The retailer wrote off these service fees as business expenses on its federal income tax return. In Indiana, a merchant may receive a sales tax refund if it writes off receivables as uncollectible bad debt "for federal tax purposes." However, the retailer was not eligible for the refund because it did not write off the uncollectible credit card accounts under the appropriate section of the Internal Revenue Code.

Home Depot U.S.A., Inc. v. Indiana Department of State Revenue , Indiana Tax Court, No. 49T10-0703-TA-11, July 28, 2008, ¶401-319

  Other References:

  Explanations at ¶61-120