Current through Register Vol. 50, No. 9, September 20, 2024
A.R.S.
47:315(A) and 47:337.34(A)
provide special rules for the handling of taxes which have been charged to the
account of a purchaser, consumer, or user in cases where the property sold has
been returned to the dealer or where a refund is made of the charges for
services upon which a tax was based. In either case, if the tax has been
collected or charged to the account of the purchaser or consumer or user and
has not yet been remitted to the collector, and a refund or credit is made to
the purchaser or consumer, the dealer may delete the sale and the tax due in
submitting his return for the current tax period. If the merchandise is
returned to the dealer or if a refund is made to the customer for any charges
for services after the tax collected or charged to the customer's account has
been remitted to the collector, the dealer may file an amended sales tax return
for the period in which the tax so refunded was originally remitted. The blank
return form must be obtained from the appropriate taxing authority to ensure
that it bears the correct taxpayer identification and account information and
the proper marking of an "amended" return. The dealer must complete the amended
return by reporting sales and deductions after making the proper adjustments to
reflect the rescinded sale or sales. The credit balance which will result from
the computation of total tax, penalty, and interest will be refunded to the
dealer in the same manner as a credit return which is timely filed in
accordance with §4351
B.R.S.
47:315(B) and
R.S.
47:337.34(B) provide a
dealer with a method for claiming refunds for the recovery of taxes which have
been remitted to the collector, but are later written off as uncollectible
accounts from credit customers. Dealers submitting refund claims should be
aware of the following restrictions specifically provided in or authorized by
R.S.
47:315(B) and 47:337.34(B).
1. The state sales or use tax is refundable
on debts incurred after January 1, 1976, that ultimately become worthless. The
tax will not be refunded on worthless debts incurred prior to January 1, 1976.
The local sales or use tax is refundable on debts incurred after September 3,
1989, which ultimately become worthless. The tax will not be refunded on
worthless debts incurred prior to September 3, 1989.
2. Before the collector can issue a sales tax
refund on a bad debt, the debt must actually have been deducted on a federal
income tax return in accordance with Section 166 of the United States Internal
Revenue Code. Since the issuance of refunds is tied to charge-offs on the
annual federal return, the collector will process one refund per year for each
dealer.
3. If after a debt is
charged off as worthless and a sales tax refund issued, all or some portion of
the debt is collected, the gross amount collected shall be reported as a new
sale for the period when the recovery is made.
4. The local credit or refund shall be
granted whenever the Louisiana Department of Revenue has found the dealer to be
entitled to reimbursement in accordance with
R.S.
47:337.34(B)(1).
5. The sales tax is refundable only on those
bad debts that are the result of credit or deferred payment sales of tangible
personal property and sales of services financed by the dealer making the sale.
No refund is authorized on bad debts arising from leases or rentals, even
though tax may have been charged on such transactions, or on sales financed by
lending institutions or independent credit card plans, unless the lender has
full recourse against the seller for any unpaid amounts. The sales tax is
refundable on bad debts which arise because of the issuance of worthless checks
only to the extent the check was in payment of taxable tangible personal
property.
6. No refund will be
issued in the case where a dealer has repossessed saleable merchandise and
cancelled the customer's credit obligation.
7. Dealers may recover sales tax remitted on
bad debts solely through the issuance of refunds by the collector. Dealers must
continue to file sales tax returns reporting their total sales of merchandise
during each taxable period, regardless of whether customer obligations have
been collected. Deductions for bad debt losses may not be taken on sales tax
returns.
C. Refund
claims submitted to the collector must be accompanied by schedules detailing
the names of debtors whose obligations were charged off, the uncollectible
amounts, the amount of debt written off which was incurred prior to January 1,
1976, for state sales or use tax purposes or September 3, 1989, for local sales
or use tax purposes, nontaxable portion of debt written off, and tax claimed.
1. Refunds will not be issued based solely
upon increases in bad debt reserve amounts. Dealers who maintain such reserve
accounts must base their claims on the individual bad debts charged against the
reserve.
2. Taxpayers who charge
off more that 200 taxable accounts annually, and for whom the furnishing of
detailed information required above would be unreasonably burdensome, may apply
for permission to submit the required data in some other form.
3. All refund claims filed with the collector
are subject to office or field examination and verification, so dealers must
maintain auditable records to support their claims. The records must be able to
substantiate that the sales tax was charged and remitted to the collector on
the original sales and that the dealers made reasonable efforts to collect the
debt amounts. Dealers must have good evidence that debts charged off are
worthless and will remain so in the future. The debt must actually be charged
off as worthless on a federal income tax return before a refund of state sales
or use tax will be processed by the Department of Revenue. The credit or refund
for local sales or use tax shall be granted whenever the Louisiana Department
of Revenue has found the dealer to be entitled to reimbursement in accordance
with R.S.
47:337.34(B)(1). In the
absence of the required records, a dealer will not be entitled to
refund.
AUTHORITY NOTE:
Promulgated in accordance with
R.S.
47:315,
R.S.
47:337.2,
R.S
47:337.34, and
R.S
47:1511.
