88R4288 CJD-F
By: Longoria H.B. No. 3389
A BILL TO BE ENTITLED
AN ACT
relating to a refund of motor vehicle sales taxes paid on certain
bad debt.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter C, Chapter 152, Tax Code, is amended
by adding Section 152.049 to read as follows:
Sec. 152.049. REFUND FOR TAX PAID ON BAD DEBT. (a) In this
section:
(1) "Bad debt" means the total principal amount of a
debt remaining unpaid from a retail installment transaction that
was charged off for federal income tax purposes.
(2) "Lender" means a person:
(A) that holds or previously held a retail
account purchased directly from a seller required by this chapter
to collect the sales tax imposed by Section 152.021 who remitted the
tax to the tax assessor-collector; and
(B) that:
(i) is an authorized lender under Chapter
341, Finance Code; or
(ii) holds a motor vehicle sales finance
license under Subchapter F, Chapter 348, Finance Code.
(3) "Passenger car" means a motor vehicle, including a
motorcycle, used to transport persons and designed to accommodate
10 or fewer passengers, including the operator.
(4) "Retail installment transaction" has the meaning
assigned by Section 348.001, Finance Code.
(b) A seller who is required by this chapter to collect the
sales tax imposed by Section 152.021 may file a claim with and is
entitled to receive from the comptroller a refund of sales taxes
paid on the seller's bad debt in the amount computed under
Subsection (c) if:
(1) the tax was remitted to the tax assessor-collector
on a passenger car sold in a retail installment transaction;
(2) the seller determines that the account associated
with the debt is uncollectible and worthless; and
(3) the account associated with the debt is written
off as a bad debt on the accounting books and deductible on the
federal income tax return of the seller.
(c) The amount of the refund is equal to the amount computed
by:
(1) allocating the remaining unpaid principal balance
of the account associated with the bad debt between sales tax,
taxable charges, and nontaxable charges in a manner that is
proportional to the allocation of the original unpaid balance of
the account between sales tax, taxable charges, and nontaxable
charges; and
(2) multiplying the amount of the unpaid principal
balance of the account allocated to taxable charges as determined
under Subdivision (1) by the tax rate prescribed by Section
152.021.
(d) If the seller assigns the retail installment contract to
a lender in a retail installment transaction, the lender may file a
claim with and is entitled to receive from the comptroller the
refund under Subsection (b), provided that:
(1) the requirements of Subsection (b) are satisfied
by the seller or the lender; and
(2) the seller has not received a refund for sales
taxes paid on the bad debt that is the subject of the lender's
claim.
(e) If after receiving a refund under this section a seller
or lender collects all or part of the principal amount of the bad
debt for which the seller or lender claimed the refund, the seller
or lender shall deduct from the next claim for a refund the seller
or lender files under this section an amount equal to the amount
computed by:
(1) allocating the amount collected by the seller or
lender between sales tax, taxable charges, and nontaxable charges
in a manner that is proportional to the allocation of the original
unpaid balance of the account between sales tax, taxable charges,
and nontaxable charges; and
(2) multiplying the amount collected by the seller or
lender allocated to taxable charges as determined under Subdivision
(1) by the tax rate prescribed by Section 152.021.
(f) This section does not apply to a seller-financed sale.
SECTION 2. The change in law made by this Act does not
affect tax liability accruing before the effective date of this
Act. That liability continues in effect as if this Act had not been
enacted, and the former law is continued in effect for the
collection of taxes due and for civil and criminal enforcement of
the liability for those taxes.
SECTION 3. This Act takes effect September 1, 2023.