Bad debts

From the 2024 DOR Tax Exemption Study

82.08.037; 82.12.037 - Bad debts Description Sellers can take a deduction for sales or a credit for use tax previously paid on bad debts. "Bad debts" has the same meaning as defined in the internal revenue code (26 U.S.C. Sec. 166). "Bad debts" does not include: - Amounts due on property that remains with the seller until fully paid for. - Debt collection expenses. - Debts sold or assigned by the seller to third parties without recourse against the seller. - Repossessed property. Purpose To relieve sellers of the requirement of remitting sales or paying use tax on amounts they did not receive. Taxpayer ($ in millions): savings FY 2024 FY 2025 FY 2026 FY 2027 State Taxes $8.710 $9.040 $9.350 $9.680 Local Taxes $3.760 $3.910 $4.040 $4.190 Repeal of Repealing this deduction/credit would increase revenues. exemption Potential ($ in millions): revenue gains FY 2024 FY 2025 FY 2026 FY 2027 from full repeal State Taxes $0.000 $8.290 $9.340 $9.690 Local Taxes $0.000 $3.580 $4.040 $4.190 Assumptions - This repeal takes effect July 1, 2024, and impacts 11 months of collections in fiscal year 2025. - Growth rate mirrors the sales tax growth rate reflected in the Economic and Revenue Forecast