S0097B1275A02742 VDL:DM 07/05/07 #90 A02742
AMENDMENTS TO SENATE BILL NO. 97
Sponsor: REPRESENTATIVE J. EVANS
Printer's No. 1275
1 Amend Title, page 1, line 13, by inserting after
2 "MANUFACTURE""
3 and further providing for refund of sales tax
4 attributed to bad debt
5 Amend Bill, page 7, by inserting between lines 12 and 13
6 Section 1.1. Section 247.1 of the act, amended June 22, 2001
7 (P.L.353, No.23) and October 18, 2006 (P.L.1149, No.119), is
8 amended to read:
9 Section 247.1. Refund of Sales Tax Attributed to Bad Debt.--
10 (a) A vendor may file a petition for refund of sales tax paid
11 to the department that is attributed to a bad debt if all of the
12 following apply:
13 (1) The purchaser fails to pay [the vendor] the total
14 purchase price.
15 (2) The purchase price is written off, either in whole or in
16 part, as a bad debt on the [vendor's] books and records of the
17 vendor or an affiliate of the vendor.
18 (3) The [bad] debt has been deducted for Federal income tax
19 purposes under section 166 of the Internal Revenue Code of 1986
20 (Public Law 99-514, 26 U.S.C. § 166).
21 [The petition shall be filed with the department under Article
22 XXVII within the time limitations prescribed by section 3003.1
23 of this act.]
24 (a.1) A petition for refund which is authorized by this
25 section must be filed with the department within the time
26 limitations prescribed by section 3003.1(a).
27 (a.2) In the case of private label credit card accounts not
28 qualifying under subsection (a), a vendor or lender that makes
29 an election pursuant to subsection (a.3) shall be entitled to
30 file a petition for refund of sales tax that the vendor has
31 previously reported and paid to the department if all of the
32 following conditions are met:
33 (1) No refund was previously allowed with respect to the
34 portion of the account written off as a bad debt.
35 (2) The account has been found worthless and written off,
36 either in whole or in part, as bad debt on the books and records
37 of the lender or an affiliate of the lender.
38 (3) The account has been deducted for Federal income tax
39 purposes under section 166 of the Internal Revenue Code of 1986
40 (Public Law 99-514, 26 U.S.C. § 166) by the lender or an
1 affiliate of the lender.
2 (a.3) In order to be eligible for a refund under subsection
3 (a.2), the lender and the vendor must execute and file with the
4 department a joint election, signed by both parties, designating
5 which party is entitled to claim the refund. This election may
6 not be revoked unless a written notice is signed by the party
7 that signed the election being revoked and is filed with the
8 department.
9 (b) The refund authorized by this section shall be limited
10 to the sales tax paid to the department that is attributed to
11 the bad debt, less any discount under section 227 of this act.
12 Partial payments by the purchaser [to the vendor] shall be
13 prorated between the original purchase price and the sales tax
14 due on the sale. Payments made [to a vendor] on any transaction
15 which includes both taxable and nontaxable components shall be
16 allocated proportionally between the taxable and nontaxable
17 components.
18 (c) A vendor or a lender may assign its right to petition
19 and receive a refund of sales tax attributed to a bad debt to an
20 [affiliated entity. A vendor may not assign its right to
21 petition and receive a refund of sales tax attributed to a bad
22 debt to any other person] affiliate.
23 (d) No refund shall be granted under this section for any of
24 the following:
25 (i) Interest.
26 (ii) Finance charges.
27 (iii) Expenses incurred in attempting to collect any amount
28 receivable.
29 (e) [The documentation, procedures and methods for claiming
30 and calculating the refund allowed under this section shall be
31 in such form as the department may prescribe.] Documentation
32 requirements are as follows:
33 (1) Any person claiming a refund under this section must, on
34 request, make available adequate books, records or other
35 documentation supporting the claimed refund, including:
36 (i) Date of original sale and name and Pennsylvania sales
37 tax license number of the retailer.
38 (ii) Name and address of purchaser.
39 (iii) Amount that the purchaser paid or agreed to pay.
40 (iv) Taxable and nontaxable charges.
41 (v) Amount on which the retailer reported and paid sales
42 tax.
43 (vi) All payments or other credits applied to the account of
44 the purchaser.
45 (vii) Evidence that the uncollected amount has been
46 designated as a bad debt in the books and records of the vendor
47 or lender, as appropriate, and that the amount has been claimed
48 as a bad debt deduction for Federal income tax purposes.
49 (viii) The county in which any local sales tax was incurred.
50 (ix) The unpaid portion of the sales price.
51 (x) A certification, under penalty or perjury, that no
52 person has collected money on the bad debt for which the refund
53 is claimed.
54 (xi) Any other information required by the department.
55 (2) A person claiming a refund under this section may
56 provide alternative forms of documentation acceptable to the
57 department if appropriate in light of the volume and character
58 of uncollectible accounts. This includes the following:
59 (i) If a vendor remits sales or use tax to the Commonwealth
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1 and to another state, the entity claiming a refund under this
2 section may use an apportionment method to substantiate the
3 amount of Pennsylvania tax included in the bad debts to which
4 the refund applies.
5 (ii) The apportionment method must use the vendor's
6 Pennsylvania and non-Pennsylvania sales, the vendor's taxable
7 and nontaxable sales and the amount of tax the vendor remitted
8 to Pennsylvania.
9 (f) The following apply:
10 (1) If the purchase price that is attributed to a prior bad
11 debt refund is thereafter collected, in whole or in part[,] by
12 the vendor or [affiliated] lender, or an affiliate of the vendor
13 or lender, the entity claiming the refund shall remit the
14 proportional tax to the department with the first return filed
15 after the collection. If the entity is not required to file
16 periodic returns, the entity shall remit the proportional tax to
17 the department with another return pursuant to section 217(c).
18 (2) Any consideration received for the assignment, sale or
19 other transfer of a bad debt with respect to which a refund has
20 been granted shall be deemed to be a collection of a prior bad
21 debt. This paragraph shall not apply to a transfer to an entity
22 that is part of the same affiliated group, as defined by section
23 1504 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
24 U.S.C. § 1504).
25 (3) A person that collects, in whole or in part, the
26 purchase price attributed to a prior bad debt refund is required
27 to maintain adequate books, records or other documentation to
28 allow the department to determine whether the purchase price
29 attributed to a prior bad debt refund has been collected.
30 Information under this paragraph includes the pertinent facts
31 required by subsection (e).
32 (4) If it is determined by the department that a prior bad
33 debt has been collected, in whole or in part, and the
34 proportional tax has not been properly reported and paid to the
35 department, the person that claimed the refund on the
36 transaction shall report and pay the proportional tax to the
37 department plus applicable interest and penalty under this
38 article.
39 (g) Notwithstanding the provisions of section 806.1 of the
40 act of April 9, 1929 (P.L.343, No.176), known as "The Fiscal
41 Code," no interest shall be paid by the Commonwealth on refunds
42 of sales tax attributed to bad debt under this section.
43 (h) No refund or credit of sales tax shall be made for any
44 uncollected purchase price or bad debt except as authorized by
45 this section. No deduction or credit for bad debt may be taken
46 on any return filed with the department. This section shall
47 provide the exclusive procedure for claiming a refund or credit
48 of sales tax attributed to uncollected purchase price or bad
49 debt.
50 (i) [For purposes of this section, the term "affiliated
51 entity"shall mean any corporation that is part of the same
52 affiliated group as the vendor as defined by] As used in this
53 section, the following words and phrases shall have the meanings
54 given to them in this subsection:
55 (1) "Affiliate." A person that is:
56 (i) an affiliated entity, under section 1504[(a)(1)] of the
57 Internal Revenue Code of 1986[.], of a vendor; or
58 (ii) a person described in paragraph (2)(i) or (ii) that
59 would be an affiliated entity, under section section 1504 of the
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1 Internal Revenue Code of 1986, of a vendor but for the fact the
2 person is not a corporation, an assignee or another transferee
3 of a person described in paragraph (2) (i) or (ii).
4 (2) "Lender." Any of the following:
5 (i) A person that owns or has owned a private label credit
6 card account purchased directly from a vendor that reported the
7 tax under this article.
8 (ii) A person that owns or has owned a private label credit
9 card account pursuant to a contract directly with the vendor
10 that reported the tax under this article.
11 (iii) A person that is:
12 (A) an affiliate of a person described in subparagraph (i)
13 or (ii); or
14 (B) an assignee or other transferee of a person described in
15 subparagraph (i) or (ii).
16 (3) "Private label credit card." Any charge card, credit
17 card or other instrument serving similar purpose which carries,
18 refers to or is branded with the name or logo of a vendor and
19 which can be used for purchases from the vendor. The term does
20 not include a card or instrument which may also be used to make
21 purchases from persons other than the vendor whose name or logo
22 appears on the card or instrument or that vendor's affiliates.
23 Nothing in this paragraph authorizes a refund with respect to
24 bad debts attributable to sales by unrelated persons referred to
25 in this paragraph.
26 Amend Sec. 10, page 21, by inserting between lines 28 and 29
27 (1) The amendment of section 247.1 of the act shall
28 apply to amounts deducted as bad debts on Federal income tax
29 returns required to be filed after January 1, 2008.
30 Amend Sec. 10, page 21, line 29, by striking out "(1)" and
31 inserting
32 (1.1)
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