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 130.0090

130.0090 Bad Debt Deduction is a Credit Only. Seller A sells equipment and reports tax on the sale. The purchaser defaults on payments on the promissory note given for the equipment and the equipment is repossessed. The equipment is then sold to a third party for the amount due on the note for the original sale.

Seller A may claim a bad debt deduction as specified in Regulation 1642 for the original sale. The fact that the second sale was for the balance of the promissory note does not exclude a tax liability for the second sale. This is a separate transaction and tax is due on the gross receipts from the second sale. 8/4/94.