August 8, 2007, Introduced by Rep. Bieda 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 2004 PA 172.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 9a. (1) In computing the amount of tax levied under this
act for any month, 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. 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) 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.
(4) If the books and records of a seller under the streamlined
sales
and use tax act 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.
(5)
As used in this section: , "bad
(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) (a)
Interest, finance charge, or use
tax on the purchase
price.
(ii) (b)
Uncollectible amounts on property
that remains in the
possession of the seller until the full purchase price is paid.
(iii) (c)
Expenses incurred in attempting to
collect any account
receivable or any portion of the debt recovered.
(iv) (d)
Any accounts receivable that have
been sold to and
remain in the possession of a third party for collection.
(v) (e)
Repossessed property.
(b) "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.
Enacting section 1. This amendatory act is curative and shall
be retroactively applied, expressing the original intent of the
legislature that a deduction for a bad debt for a seller under the
use tax act, 1937 PA 94, MCL 205.91 to 205.111, is available
exclusively to those persons with the legal liability to remit the
tax on the specific sales, rental, or service transaction for which
the bad debt is recognized for federal income tax purposes, and
correcting any misinterpretation of the meaning of the term
"seller" that may have been caused by the Michigan court of appeals
decision in Daimler Chrysler Services North America LLC v
Department of Treasury, No. 264323.