August 8, 2007, Introduced by Rep. Bieda and referred to the Committee on Tax Policy.
A bill to amend 1933 PA 167, entitled
"General sales tax act,"
by amending section 4i (MCL 205.54i), as amended by 2004 PA 173.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec.
4i. (1) As used in this section: , "bad
(a) "Bad debt" means any portion of a debt that is related to
a sale at retail taxable under this act for which gross proceeds
are not otherwise deductible or excludable and that is eligible to
be claimed, or could be eligible to be claimed if the taxpayer kept
accounts on an accrual basis, as a deduction pursuant to section
166 of the internal revenue code, 26 USC 166. A bad debt shall not
include any finance charge, interest, or sales tax on the purchase
price, uncollectible amounts on property that remains in the
possession of the taxpayer until the full purchase price is paid,
expenses incurred in attempting to collect any account receivable
or any portion of the debt recovered, any accounts receivable that
have been sold to and remain in the possession of a third party for
collection, and repossessed property.
(b) "Taxpayer" means a person that has remitted sales tax
directly to the department on the specific sales at retail
transaction for which the bad debt is recognized for federal income
tax purposes.
(2) In computing the amount of tax levied under this act for
any month, a taxpayer may deduct the amount of bad debts from his
or her gross proceeds used for the computation of the tax. The
amount of gross proceeds deducted must be charged off as
uncollectible on the books and records of the taxpayer 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 taxpayer claimed a deduction under this section,
the taxpayer 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.
(3) 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 by a taxpayer claiming a deduction
pursuant to this section and shall ensure that the deduction on any
bad debt does not result in the taxpayer claiming the deduction
recovering any more or less than the taxes imposed on the sale that
constitutes the bad debt.
(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 taxpayer,
any bad debt allowable to the taxpayer and shall credit or refund
that amount of bad debt allowed or refunded to the taxpayer.
(5) If the books and records of a taxpayer 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 taxpayer
may allocate the bad debts.
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 taxpayer under
the general sales tax act, 1933 PA 167, MCL 205.51 to 205.78, is
available exclusively to those persons with the legal liability to
remit the tax on the specific sale at retail for which the bad debt
deduction is recognized for federal income tax purposes, and
correcting any misinterpretation of the meaning of the term
"taxpayer" 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.