Washington Code 82.08.037 – Credits and refunds for bad debts
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(1) A seller is entitled to a credit or refund for sales taxes previously paid on bad debts, as that term is used in 26 U.S.C. § 166, as amended or renumbered as of January 1, 2003.
Terms Used In Washington Code 82.08.037
- National Bank: A bank that is subject to the supervision of the Comptroller of the Currency. The Office of the Comptroller of the Currency is a bureau of the U.S. Treasury Department. A national bank can be recognized because it must have "national" or "national association" in its name. Source: OCC
- person: may be construed to include the United States, this state, or any state or territory, or any public or private corporation or limited liability company, as well as an individual. See Washington Code 1.16.080
- Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
(2) For purposes of this section, “bad debts” does not include:
(a) Amounts due on property that remains in the possession of the seller until the full purchase price is paid;
(b) Expenses incurred in attempting to collect debt;
(c) Debts sold or assigned by the seller to third parties, where the third party is without recourse against the seller; and
(d) Repossessed property.
(3) If a credit or refund of sales tax is taken for a bad debt and the debt is subsequently collected in whole or in part, the tax on the amount collected must be paid and reported on the return filed for the period in which the collection is made.
(4) Payments on a previously claimed bad debt are applied first proportionally to the taxable price of the property or service and the sales or use tax thereon, and secondly to interest, service charges, and any other charges.
(5) If the seller uses a certified service provider as defined in RCW 82.32.020 to administer its sales tax responsibilities, the certified service provider may claim, on behalf of the seller, the credit or refund allowed by this section. The certified service provider must credit or refund the full amount received to the seller.
(6) The department must allow an allocation of bad debts among member states to the streamlined sales tax agreement, as defined in RCW 82.58.010(1), if the books and records of the person claiming bad debts support the allocation.
(7) A person’s right to claim a credit or refund under this section is not assignable. No person other than the original seller in the transaction that generated the bad debt or, as provided in subsection (5) of this section, a certified service provider, is entitled to claim a credit or refund under this section. If the original seller in the transaction that generated the bad debt has sold or assigned the debt instrument to a third party with recourse, the original seller may claim a credit or refund under this section only after the debt instrument is reassigned by the third party to the original seller.
[ 2010 1st sp.s. c 23 § 1502; 2007 c 6 § 102; 2004 c 153 § 302; 2003 c 168 § 212; 1982 1st ex.s. c 35 § 35.]
NOTES:
Intent—2010 1st sp.s. c 23 §§ 1502 and 1503: “The legislature intends with sections 1502 and 1503 of this act to supersede the holding of the supreme court of the state of Washington in Puget Sound National Bank v. Department of Revenue, 123 Wn.2d 284 (1994).” [ 2010 1st sp.s. c 23 § 1501.]
Application—2010 1st sp.s. c 23 §§ 1502 and 1503: “Sections 1502 and 1503 of this act apply to claims for credit or refund filed with the department of revenue after June 30, 2010.” [ 2010 1st sp.s. c 23 § 1719.]
Effective date—2010 1st sp.s. c 23: See note following RCW 82.32.655.
Findings—Intent—2010 1st sp.s. c 23: See notes following RCW 82.04.220.
Part headings not law—Savings—Effective date—Severability—2007 c 6: See notes following RCW 82.32.020.
Findings—Intent—2007 c 6: See note following RCW 82.14.390.
Bad debts—Intent—2004 c 153 §§ 302-305: “For the purposes of sections 302 through 305 of this act, the legislature does not intend by any provision of this act relating to bad debts, and did not intend by any provision of chapter 168, Laws of 2003 relating to bad debts, to affect the holding of the supreme court of the state of Washington in Puget Sound National Bank v. the Department of Revenue, 123 Wn. 2nd 284 (1994).” [ 2004 c 153 § 301.]
Retroactive effective date—Effective date—2004 c 153: See note following RCW 82.08.0293.
Effective dates—Part headings not law—2003 c 168: See notes following RCW 82.08.010.
Severability—Effective dates—1982 1st ex.s. c 35: See notes following RCW 82.08.020.