§ 57-39.4-21 — (320) Uniform rules for recovery of bad debts

North Dakota § 57-39.4-21

• Jurisdiction: North Dakota
• Title 57: Taxation
• Ch. 57-39.4: Streamlined Sales and Use Tax Agreement

Text

Each member state shall use the following to provide a deduction for bad debts to a seller.
To the extent a member state provides a bad debt deduction to any other party, the same
procedures will apply. Each member state shall:
1. Allow a deduction from taxable sales for bad debts. Any deduction taken that is
attributed to bad debts shall not include interest.
2. Utilize the federal definition of "bad debt" in 26 U.S.C. 166 as the basis for calculating
bad debt recovery. However, the amount calculated pursuant to 26 U.S.C. 166 shall be
adjusted to exclude financing charges or interest, sales or use taxes charged on the
purchase price, uncollectible amounts on property that remain in the possession of the
seller until the full purchase price is paid, expenses incurred in attempting to collect
any debt, and repossessed property.
3. Allow bad debts to be 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 is eligible to be
deducted for federal income tax purposes. For purposes of this subsection, a claimant
who is not required to file federal income tax returns may deduct a bad debt on a
return filed for the period in which the bad debt 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.
4. Require that, if a deduction is taken for a bad debt and the debt is subsequently
collected in whole or in part, the tax on the amount so collected must be paid and
reported on the return filed for the period in which the collection is made.
5. Provide that, when the amount of bad debt exceeds the amount of taxable sales for
the period during which the bad debt is written off, a refund claim may be filed within
the member state's otherwise applicable statute of limitations for refund claims.
However, the statute of limitations shall be measured from the due date of the return
on which the bad debt could first be claimed.
6. When filing responsibilities have been assumed by a certified service provider, allow
the certified service provider to claim, on behalf of the seller, any bad debt allowance
provided by this section. The certified service provider must credit or refund the full
amount of any bad debt allowance or refund received to the seller.
7. Provide that, for the purposes of reporting a payment received on a previously claimed
bad debt, any payments made on a debt or account are applied first proportionally to
the taxable price of the property or service and the sales tax thereon and secondly to
interest, service charges, and any other charges.
8. When the books and records of the party claiming the bad debt allowance support an
allocation of the bad debts among the member states, permit the allocation.