26-52-309. Deduction for bad debts generally.

26-52-309. Deduction for bad debts generally. (a)(1) A taxpayer is allowed a deduction from taxable sales for a bad debt. (2) Any deduction taken under this section that is attributed to a bad debt shall not include interest. (b) The federal definition of “bad debt” in 26 U.S.C. § 166, as in effect on January 1, 2007, is the basis for calculating a bad debt deduction under this section except that the amount calculated pursuant to 26 U.S.C. § 166 shall be adjusted to exclude: (1) A financing charge or interest; (2) A sales or use tax charged on the purchase price; (3) An uncollectible amount on property that remains in the possession of the taxpayer or seller, until the full purchase price is paid; and (4) An expense incurred in attempting to collect any debt or repossessed property. (c)(1) A bad debt may be deducted on the sales and use tax return of a taxpayer for the tax period during which: (A) The bad debt is written off as uncollectible in the taxpayer's books and records; and (B) The taxpayer is eligible to deduct the bad debt for federal income tax purposes if the taxpayer or seller kept accounts on a cash basis or could be eligible to be claimed if the taxpayer or seller kept accounts on an accrual basis. (2) For purposes of this subsection, a taxpayer who is not required to file a federal income tax return may deduct a bad debt on a sales and use tax return filed for the period in which the bad debt is written off as uncollectible in the taxpayer's books and records if the taxpayer would be eligible for a bad debt deduction for federal income tax purposes if the taxpayer were required to file a federal income tax return. (d) If a bad debt deduction under this section is taken for a bad debt and the debt is subsequently collected in whole or in part, the tax imposed by this chapter on the amount collected shall be paid and reported on the sales and use tax return filed for the tax period in which the collection is made. (e)(1) If the amount of bad debt exceeds the amount of taxable sales for the tax period during which the bad debt is written off, the taxpayer may file a claim for a refund. (2) The refund claim shall be filed within three (3) years from the due date of the sales and use tax return on which the bad debt could first be claimed. (f)(1) If filing responsibilities have been assumed by a certified service provider, the certified service provider may claim, on behalf of the taxpayer, any bad debt deduction provided by this section. (2) The certified service provider shall credit or refund the full amount of any bad debt deduction or refund received to the taxpayer. (g) For the purposes of reporting a payment received on a previously claimed bad debt, any payment made on a debt or account is applied first proportionally to the taxable price of the tangible personal property or service and the sales tax on the tangible personal property or service and second to interest, service charges, and any other charges. (h) If the books and records of a taxpayer claiming a bad debt deduction under this section support an allocation of the bad debt among the states which are members of the Streamlined Sales and Use Tax Agreement, the allocation is permitted. (i) Except as provided in subsection (f) of this section, the only party entitled to a bad debt deduction or refund pursuant to this section is the taxpayer that originally reported and remitted the tax in question.