Bill Text: MI HB5417 | 2009-2010 | 95th Legislature | Introduced

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Bill Title: Use tax; credits and deductions; bad debt deduction from gross proceeds; reduce. Amends sec. 9a of 1937 PA 94 (MCL 205.99a).

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2009-09-22 - Printed Bill Filed 09/18/2009 [HB5417 Detail]

Download: Michigan-2009-HB5417-Introduced.html

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HOUSE BILL No. 5417

 

September 17, 2009, Introduced by Rep. Smith and referred to the Committee on Tax Policy.

 

     A bill to amend 1937 PA 94, entitled

 

"Use tax act,"

 

by amending section 9a (MCL 205.99a), as amended by 2007 PA 104.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 9a. (1) In computing the amount of tax levied under this

 

act for any month prior to October 1, 2009, a seller may deduct the

 

amount of bad debts from his or her gross sales, rentals, or

 

services used for the computation of the tax. In computing the

 

amount of tax levied under this act for any month after September

 

30, 2009, a taxpayer may deduct 80% of the amount of bad debts from

 

his or her gross proceeds used for the computation of the tax. The

 

amount of gross sales, rentals, or services deducted must be

 

charged off as uncollectible on the books and records of the seller

 

at the time the debt becomes worthless and deducted on the return

 

for the period during which the bad debt is written off as

 

uncollectible in the claimant's books and records and must be

 

eligible to be deducted for federal income tax purposes. For

 

purposes of this section, a claimant who is not required to file a

 

federal income tax return may deduct a bad debt on a return filed

 

for the period in which the bad debt becomes worthless and is

 

written off as uncollectible in the claimant's books and records

 

and would be eligible for a bad debt deduction for federal income

 

tax purposes if the claimant was required to file a federal income

 

tax return. If a consumer or other person pays all or part of a bad

 

debt with respect to which a seller claimed a deduction under this

 

section, the seller is liable for the amount of taxes deducted in

 

connection with that portion of the debt for which payment is

 

received and shall remit these taxes in his or her next payment to

 

the department. Any payments made on a bad debt shall be applied

 

proportionally first to the taxable price of the property and the

 

tax on the property and second to any interest, service, or other

 

charge.

 

     (2) Any claim for a bad debt deduction under this section

 

shall be supported by that evidence required by the department. The

 

department shall review any change in the rate of taxation

 

applicable to any taxable sales, rentals, or services by a seller

 

claiming a deduction pursuant to this section and shall ensure that

 

the deduction on any bad debt does not result in the seller

 

claiming the deduction recovering any more or less than the taxes

 

imposed on the sale, rental, or service that constitutes the bad

 

debt.

 

     (3) After September 30, 2009, if a taxpayer who reported the

 

tax and a lender execute and maintain a written election

 

designating which party may claim the deduction, a claimant is

 

entitled to a deduction or refund of the tax related to a sale at

 

retail that was previously reported and paid if all of the

 

following conditions are met:

 

     (a) No deduction or refund was previously claimed or allowed

 

on any portion of the account receivable.

 

     (b) The account receivable has been found worthless and

 

written off by the taxpayer that made the sale or the lender on or

 

after September 30, 2009.

 

     (4) If a certified service provider assumed filing

 

responsibility under the streamlined sales and use tax

 

administration act, 2004 PA 174, MCL 205.801 to 205.833, the

 

certified service provider may claim, on behalf of the seller, any

 

bad debt allowable to the seller and shall credit or refund that

 

amount of bad debt allowed or refunded to the seller.

 

     (5) If the books and records of a seller under the streamlined

 

sales and use tax agreement under the streamlined sales and use tax

 

administration act, 2004 PA 174, MCL 205.801 to 205.833, that

 

claims a bad debt allowance support an allocation of the bad debts

 

among member states of that agreement, the seller may allocate the

 

bad debts.

 

     (6) As used in this section:

 

     (a) "Bad debt" means any portion of a debt resulting from a

 

seller's collection of the use tax under this act on the purchase

 

of tangible personal property or services that is not otherwise

 

deductible or excludable and that is eligible to be claimed, or

 

could be eligible to be claimed if the seller kept accounts on an

 

accrual basis, as a deduction pursuant to section 166 of the

 

internal revenue code, 26 USC 166. A bad debt does not include any

 

of the following:

 

     (i) Interest, finance charge, or use tax on the purchase price.

 

     (ii) Uncollectible amounts on property that remains in the

 

possession of the seller until the full purchase price is paid.

 

     (iii) Expenses incurred in attempting to collect any account

 

receivable or any portion of the debt recovered.

 

     (iv) Any accounts receivable that have been sold to and remain

 

in the possession of a third party for collection.

 

     (v) Repossessed property.

 

     (b) Except as provided in subdivision (c), "lender" includes

 

any of the following:

 

     (i) Any person who holds or has held an account receivable

 

which that person purchased directly from a taxpayer who reported

 

the tax.

 

     (ii) Any person who holds or has held an account receivable

 

pursuant to that person's contract directly with the taxpayer who

 

reported the tax.

 

     (iii) The issuer of the private label credit card.

 

     (c) "Lender" does not include the issuer of a credit card or

 

instrument that can be used to make purchases from a person other

 

than the vendor whose name or logo appears on the card or

 

instrument or that vendor's affiliates.

 

     (d) "Private label credit card" means any charge card, credit

 

card, or other instrument serving a similar purpose that carries,

 

refers to, or is branded with the name or logo of a vendor and that

 

can only be used for purchases from the vendor.

 

     (e) "Seller" means a person who has remitted use tax directly

 

to the department on the specific sales, rental, or service

 

transaction for which the bad debt is recognized for federal income

 

tax purposes or, after September 30, 2009, a lender holding the

 

account receivable for which the bad debt is recognized, or would

 

be recognized if the claimant were a corporation, for federal

 

income tax purposes.