Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-6-4 - SALES TAX DUE MONTHLY; FILING OF REPORTS; RECORDS REQUIRED; REFUNDS; INTEREST; HEARINGS ON ASSESSMENTS; EXAMINATIONS OF RETURNS; INTER ALIA › Section 810-6-4-.01 - Accounts Charged Off (Bad Debts) And Repossessions

Current through Register Vol. 42, No. 9, June 28, 2024
(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
Statutory Authority:
Code of Ala.
				  1975
, §§
										40-23-31,
				  40-23-83.