| (4) Local sales and use tax. Only the retailer who
made the sale, or an affiliate or assignee of the retailer, is entitled
to a credit or refund for local sales and use tax paid on a bad debt
or the unpaid portion of the sales price of a taxable item repossessed
under a conditional sales contract. A person who is not the retailer
who made the sale is entitled to a credit or refund under this subsection
only for state sales and use tax imposed by Tax Code, §151.051
(Sales Tax Imposed), or §151.101 (Use Tax Imposed), unless the
retailer who made the sale expressly assigned its rights to a credit
or refund under this subsection.
(5) Statute of limitations. A claim for a credit or
a refund under this subsection must be submitted within four years
from the date a bad debt is actually charged off for federal income
tax purposes or the date the taxable item is repossessed, whichever
is applicable.
(6) Post refund collection on a bad debt or sale of
a repossessed item. A person who later collects any payment on a bad
debt or sells a repossessed item for which a credit or refund was
claimed must report the total amount collected or received from the
sale as a taxable sale in the reporting period in which the collection
or sale occurs, except when the previous credit or refund amount was
calculated by estimating post-sale collections for sold accounts in
accordance with subsection (d)(3)(E) of this section.
(7) Claiming a credit or refund.
(A) Permitted persons. A person who holds, or held
at the time of the sale, a valid Texas sales and use tax permit and
who is otherwise entitled to claim a credit or refund authorized under
this subsection may:
(i) claim a credit on the person's sales and use tax
report for tax paid on a bad debt only if the person files the tax
report electronically and claims the credit in the reporting period
in which the person's books reflect the bad debt or subsequent reporting
periods; or
(ii) request a refund in writing from the comptroller
for sales and use tax paid on a bad debt.
(B) Non-permitted persons. A person who does not hold
a valid Texas sales and use tax permit but is otherwise entitled to
a credit or refund under this subsection can only request a refund
in writing from the comptroller for sales and use tax paid to the
comptroller on the bad debt or the unpaid portion of the sales price
of a taxable item repossessed.
(C) Records required. A person claiming a credit or
requesting a refund for sales and use taxes paid on a bad debt or
the unpaid portion of the sales price of a taxable item repossessed
must maintain and make available to the comptroller:
(i) date of original credit sale and name and Texas
sales and use tax permit number of the retailer who collected and
remitted the sales and use tax to the comptroller;
(ii) amount that the purchaser contracted to pay;
(iii) taxable and nontaxable charges;
(iv) all other payments or other credits applied to
the account of the purchaser;
(v) evidence that the uncollected amount has been designated
as a bad debt in the books and records of the person who claims the
bad debt deduction, and that the amount has been claimed as a bad
debt deduction for federal income tax purposes;
(vi) identification of each city, county, transit authority,
or special purpose district to which local taxes were reported if
the claimant is claiming a refund or credit of local taxes;
(vii) the sales and use tax collected and remitted
to the comptroller; and
(viii) any additional records requested by the comptroller
to verify a credit or refund claim.
(D) Records required for bad debts acquired by assignment
or purchase. In addition to the requirements in subparagraph (C) of
this paragraph, an assignee claiming a credit or requesting a refund
for sales and use tax paid on a bad debt must maintain and make available
to the comptroller the following additional information:
(i) amount of bad debt acquired;
(ii) name and taxpayer number of the original retailer
who collected and remitted the sales or use tax;
(iii) name and taxpayer number of the person from whom
the assignee acquired the bad debt; and
(iv) a written assignment with specific language transferring
the right to a credit or refund of Texas sales or use tax paid on
a bad debt executed by the person from whom the assignee acquired
the bad debt.
(8) Alternative recordkeeping and tax calculation methods.
A person who is otherwise qualified to claim a credit or request a
refund under this subsection, and whose volume and character of uncollectible
accounts warrants an alternative method of substantiating the refund
or credit, may request approval from the comptroller to use an alternative
method of maintaining records, or an alternative method of calculating
a credit or refund, by submitting a written request to the Audit Division,
P.O. Box 13528, Austin, Texas 78711-3528.
(A) The comptroller may approve a request to maintain
records other than the records specified in paragraph (7)(C) and (D)
of this subsection if the records fairly and equitably apportion taxable
and nontaxable elements of an uncollectible account or conditional
sales contract, and substantiate the amount of Texas sales tax imposed
and remitted to the comptroller with respect to the bad debt or unpaid
sales price of a taxable item under a conditional sales contract.
(B) The comptroller may approve a request to implement
a system to report future sales and use tax responsibilities based
on a historical percentage calculated from a sample of transactions
if the system utilizes records provided by the person claiming the
credit or refund and the person who reported and remitted such tax
to the comptroller.
(C) The comptroller may revoke the authorization to
report under paragraph (8)(A) or (B) of this subsection if the comptroller
determines that the percentage being used is not representative of
the taxpayer's business operations or because of a change in law,
including a change in the interpretation of an existing law or rule.
(D) A person may submit a new request meeting the requirements
of this paragraph after a revocation. The new request should use a
method that differs from the alternative method that the comptroller
revoked.
(E) Approval of an alternative method is prospective
only and may not be used to satisfy the requirements of paragraph
(7)(C) and (D) of this subsection, concerning records required, for
periods prior to the date specified in the written approval.
(F) The approval of an alternative method applies to
only the person who submitted the written request. The approval does
not extend to any other person, regardless of whether the requesting
person and the other person are affiliates or file a consolidated
federal income tax return.
(G) Approval of an alternative recordkeeping method
does not apply to any other recordkeeping requirements for any other
purpose.
(e) Interest on sales and use tax.
(1) Cash basis of accounting. Sellers who use a cash
basis of accounting and who sell taxable items by means of a credit
sale and charge interest on the amount of credit extended, including
sales and use tax, are required to remit to the comptroller a portion
of the interest that has been collected on the state and local sales
and use taxes.
(A) If the amount of interest charged on the sales
and use tax is 18% or less, the seller must remit to the comptroller
one-half of the interest charged on the sales and use tax.
(B) If the amount of interest charged on the sales
and use tax is greater than 18%, the seller must remit the amount
of interest charged less 9.0%. For example, 21% charged less 9.0%
deduction equals 12% interest remitted. A seller will not be allowed
the 9.0% deduction if the interest rate charged on sales and use tax
differs from the interest rate charged on the sales price of the taxable
item.
(2) Determining the amount of interest. In determining
the amount of interest to be remitted to the comptroller, a seller
does not need to calculate the interest on each individual account.
A formula for the calculation may be used if the formula correctly
reflects the amount of interest collected. The formula is subject
to verification upon audit of the seller's records.
(3) Penalty and interest. Except for the provisions
of Tax Code, §151.423 (Reimbursement to Taxpayer for Tax Collections)
and §151.424 (Discount for Prepayments), all reporting, collection,
refund, and penalty provisions of Tax Code, Chapter 151, including
assessment of penalty and interest, apply to interest due.
(f) Trade-ins.
Cont'd... |
