Court Opinion

ID: 6787451
Source: CourtListenerOpinion
Date Created: 2022-07-21 01:05:02.667523+00
Date Added: 2024-06-11T16:02:57.945999
License: Public Domain

O’Donnell, J.,
dissenting.
{¶ 28} I respectfully dissent. It is undisputed that, for tax purposes, a vendor is authorized by R.C. 5739.121 to deduct certain bad debts from current taxable receipts.
{¶ 29} That statute provides:
*449{¶ 30} “As used in this section, ‘bad debt’ means any debt that has become worthless or uncollectible in the time period between a vendor’s preceding return and the present return, ha[s] been uncollected for at least six months, and that may be claimed as a deduction pursuant to the ‘Internal Revenue Code of 1954’ * * *. ‘Bad debt’ does not include any interest or sales tax on the purchase price, uncollectible amounts on property that remains in the possession of the vendor until the full purchase price is paid, expenses incurred in attempting to collect any account receivable or for any portion of the debt recovered, any accounts receivable that have been sold to a third party for collection, and repossessed property.
{¶ 31} “In computing taxable receipts for purposes of this chapter, a vendor may deduct the amount of bad debts, as defined in this section. The amount deducted must be charged off as uncollectible on the books of the vendor. A deduction may be claimed only with respect to bad debts on which the taxes pursuant to sections 5739.10 and 5739.12 of the Revised Code were paid in a preceding tax period.”
{¶ 32} Here, Chrysler Financial Company, L.L.C., which had been assigned the “entire right, title and interest in and to” the vendors’ installment contracts, filed a claim for a sales tax refund as a result of bad debts from the retail installment contracts it purchased from dealers that had financed the purchase of new vehicles. The amounts financed included the purchase price and, relevant here, the full sales tax on the purchase price of the vehicles.
{¶ 33} If a customer defaulted on an installment contract, Chrysler Financial would repossess the vehicle and sell it at auction, and any deficit constituted a loss. Chrysler Financial here claims a refund of the sales tax collected by the state on its bad debt. ■
{¶ 34} The majority asserts that if a dealer never had a claim for refund of the sales tax, Chrysler Financial could not assert an assignment of such a claim based on its status as an assignee of the dealer. However, the assignment here consisted of the dealer’s “entire right, title and interest in and to” the installment contract, authorizing Chrysler Financial to “do every act and thing necessary to collect and discharge obligations arising out of or incident to this contract and assignment.” This assignment then constitutes an assignment of all of the rights the vendor had pursuant to the contract, not merely the assignment of a right to assert a “claim.”
{¶ 35} If the original dealer — i.e., the vendor — had the right to seek a tax refund prior to the assignment of the contract, then, by operation of the assignment, that right to seek a refund transferred to Chrysler Financial. Thus, the right to assert a claim for a tax refund did not disappear merely because the *450dealer assigned its “entire right, title and interest in and to” the installment contract, because the assignment included the right to assert a refund claim.
Baker & Hostetler, L.L.P., and Edward J. Bernert; Akerman Senterfitt, David E. Otero, Peter 0. Larsen and Cynthia D. Baines, for appellant.
Jim Petro, Attorney General, and Janyce C. Katz, Assistant Attorney General, for appellee.
{¶ 36} As the majority notes, “[i]f the consumer defaults on paying the full sale price, the vendor will have paid tax to the Department of Taxation on a sale price that will not he collected.” (Emphasis added.) By precluding the vendors’ assignees from taking the bad-debt reduction, today’s opinion will allow the Department of Taxation to collect and keep the full sales tax on incomplete sales. Thus, preventing assignees from claiming these tax refunds results in the unjust enrichment of the Department of Taxation.
{¶ 37} Accordingly, I would hold that Chrysler Financial may assert its right to the refund pursuant to the dealers’ assignment of that right. Therefore, I respectfully dissent.
Lundberg Stratton, J., concurs in the foregoing dissenting opinion.