Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2017

Sales and Use Tax Annotations

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130.0000 BAD DEBTS—Regulation 1642

Annotation 130.0140

130.0140 Default on Accounts Receivable. A carpet manufacturer sells carpet to a dealer on credit and advances cash to cover the dealer's "profit, installation costs and sales tax." The dealer enters into a contract with a builder and agrees to furnish and install the carpet in a construction project. The dealer assigns the contract without recourse to the carpet manufacturer. Subsequently the builder defaults on the contract. Inasmuch as the dealer suffers no loss by reason of the builder's default, he has no basis for claiming a deduction for bad debts. 1/31/01. (Am. 2002–1).

(Note: Revenue and Taxation Code sections 6055 and 6203.5 were amended operative January 31, 2001, to allow a "lender" as defined to claim a bad debt deduction or refund under specified circumstances.)