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A BILL TO BE ENTITLED
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AN ACT
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relating to a refund of motor vehicle sales taxes paid on certain |
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bad debt. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter C, Chapter 152, Tax Code, is amended |
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by adding Section 152.049 to read as follows: |
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Sec. 152.049. REFUND FOR TAX PAID ON BAD DEBT. (a) In this |
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section: |
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(1) "Bad debt" means the total principal amount of a |
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debt remaining unpaid from a retail installment transaction that |
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was charged off for federal income tax purposes. |
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(2) "Lender" means a person: |
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(A) that holds or previously held a retail |
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account purchased directly from a seller required by this chapter |
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to collect the sales tax imposed by Section 152.021 who remitted the |
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tax to the tax assessor-collector; and |
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(B) that: |
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(i) is an authorized lender under Chapter |
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341, Finance Code; or |
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(ii) holds a motor vehicle sales finance |
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license under Subchapter F, Chapter 348, Finance Code. |
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(3) "Passenger car" means a motor vehicle, including a |
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motorcycle, used to transport persons and designed to accommodate |
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10 or fewer passengers, including the operator. |
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(4) "Retail installment transaction" has the meaning |
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assigned by Section 348.001, Finance Code. |
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(b) A seller who is required by this chapter to collect the |
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sales tax imposed by Section 152.021 may file a claim with and is |
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entitled to receive from the comptroller a refund of sales taxes |
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paid on the seller's bad debt in the amount computed under |
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Subsection (c) if: |
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(1) the tax was remitted to the tax assessor-collector |
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on a passenger car sold in a retail installment transaction; |
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(2) the seller determines that the account associated |
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with the debt is uncollectible and worthless; and |
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(3) the account associated with the debt is written |
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off as a bad debt on the accounting books and deductible on the |
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federal income tax return of the seller. |
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(c) The amount of the refund is equal to the amount computed |
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by: |
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(1) allocating the remaining unpaid principal balance |
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of the account associated with the bad debt between sales tax, |
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taxable charges, and nontaxable charges in a manner that is |
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proportional to the allocation of the original unpaid balance of |
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the account between sales tax, taxable charges, and nontaxable |
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charges; and |
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(2) multiplying the amount of the unpaid principal |
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balance of the account allocated to taxable charges as determined |
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under Subdivision (1) by the tax rate prescribed by Section |
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152.021. |
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(d) If the seller assigns the retail installment contract to |
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a lender in a retail installment transaction, the lender may file a |
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claim with and is entitled to receive from the comptroller the |
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refund under Subsection (b), provided that: |
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(1) the requirements of Subsection (b) are satisfied |
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by the seller or the lender; and |
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(2) the seller has not received a refund for sales |
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taxes paid on the bad debt that is the subject of the lender's |
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claim. |
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(e) If after receiving a refund under this section a seller |
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or lender collects all or part of the principal amount of the bad |
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debt for which the seller or lender claimed the refund, the seller |
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or lender shall deduct from the next claim for a refund the seller |
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or lender files under this section an amount equal to the amount |
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computed by: |
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(1) allocating the amount collected by the seller or |
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lender between sales tax, taxable charges, and nontaxable charges |
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in a manner that is proportional to the allocation of the original |
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unpaid balance of the account between sales tax, taxable charges, |
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and nontaxable charges; and |
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(2) multiplying the amount collected by the seller or |
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lender allocated to taxable charges as determined under Subdivision |
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(1) by the tax rate prescribed by Section 152.021. |
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(f) This section does not apply to a seller-financed sale. |
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SECTION 2. The change in law made by this Act does not |
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affect tax liability accruing before the effective date of this |
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Act. That liability continues in effect as if this Act had not been |
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enacted, and the former law is continued in effect for the |
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collection of taxes due and for civil and criminal enforcement of |
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the liability for those taxes. |
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SECTION 3. This Act takes effect September 1, 2023. |