Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2017
Sales and Use Tax Annotations
130.0095 Bad Debts—Retailer as Guarantor. To facilitate the sale of equipment, the retailer agreed to guarantee the purchase note held by the bank financing the purchase. The purchaser defaulted on the note, and the retailer was required to pay it off in accordance with the terms of the guarantee. The bad debt was written off for income tax purposes. A sales tax deduction was not allowable in this situation since the loss was not the result of credit sale but rather from the guarantee contract. A retailer is entitled to a bad debt deduction for credit losses resulting from credit sales. In this transaction, the retailer received cash for the sale, with the subsequent loss resulting not from the sale but from the guarantee contract with the bank. 8/5/94.