Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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130.0000 BAD DEBTS—Regulation 1642

Annotation 130.0005

130.0005 Cash Basis Records. Regulation 1642 provides that all retailers must report sales tax liability on an accrual basis even if their financial records are maintained on a cash basis, and that a bad debt deduction will not be disallowed retailers solely for the reason that they are on a cash reporting basis for income tax purposes. When a taxpayer maintains its records on a cash basis, a bad debt deduction with respect to tax previously paid may be taken when all collection activities have ceased and the obligation is treated by the retailer as no longer subject to collection. In addition to the records required under Regulation 1642(e), evidence of the indebtedness should be marked as "uncollectible" or "bad debt" or the records of the sale transaction should otherwise be segregated and identified for audit verification. 11/10/97. (M99–1).