car dealers get the sales tax back on bad debt

The text as introduced · 762 words

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.