89R15375 CJD-F
By: Longoria H.B. No. 5250
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 unpaid balance of an account
associated with 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 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 account associated with the debt is determined
to be worthless; and
(3) the account associated with the debt is written
off as a bad debt on the accounting books and actually charged off
for federal tax purposes.
(c) The amount of the refund is equal to the amount computed
by:
(1) allocating the bad debt between taxable and
nontaxable charges in a manner that is proportional to the
allocation of taxable and nontaxable charges the purchaser agreed
to pay in a retail installment transaction; and
(2) multiplying the amount of the bad debt 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 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 taxable and nontaxable charges in the same manner as
the bad debt is allocated under Subsection (c)(1); 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) A seller or lender claiming a refund under this section
must maintain and make available to the comptroller the following
information relating to the retail installment transaction to which
the refund relates:
(1) the name and general distinguishing number of the
seller who remitted the sales tax to the tax assessor-collector;
(2) the amount the purchaser agreed to pay in the
retail installment transaction;
(3) a copy of the application for registration or
application for title submitted to the tax assessor-collector;
(4) a copy of the title receipt issued by the tax
assessor-collector; and
(5) any additional information requested by the
comptroller to verify the refund claim.
(g) 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, 2025.