Citations Affected: IC 6-7.
Synopsis: Cigarette taxes and tobacco products taxes. Provides a
cigarette tax credit to a cigarette distributor for an uncollectible debt to
the extent that the uncollectible debt: (1) is included in the cost of
cigarette tax stamps purchased by the distributor; and (2) resulted from
a transfer of cigarettes to a retailer. Provides a tobacco tax deduction
to a tobacco products distributor from the tobacco products tax for
uncollectible debts resulting from wholesale sales of tobacco products.
Effective: July 1, 2007.
January 11, 2007, read first time and referred to Committee on Tax and Fiscal Policy.
A BILL FOR AN ACT to amend the Indiana Code concerning
subsequently collects all of the associated receivable, the
distributor shall remit the entire amount of the credit previously
claimed under subsection (a) to the department within thirty (30)
days of collection.
(c) If a distributor claims a credit under subsection (a) and subsequently collects part of the associated receivable, the distributor shall remit the amount determined under STEP SIX of the following formula to the department within thirty (30) days after collection:
STEP ONE: Determine the part of the associated receivable before collection that is attributable to the taxable price of the products subject to the tax imposed by this chapter.
STEP TWO: Determine the part of the associated receivable before collection that is attributable to the amount paid by the distributor for the stamps affixed to the products that were transferred to the retailer.
STEP THREE: Determine the sum of:
(A) the STEP ONE result; plus
(B) the STEP TWO result.
STEP FOUR: Determine the lesser of:
(A) the amount collected; or
(B) the STEP THREE result.
STEP FIVE: Divide:
(A) the STEP TWO result; by
(B) the STEP THREE result.
STEP SIX: Multiply:
(A) the STEP FOUR result; by
(B) the STEP FIVE result.
(d) If the amount of the credit to which a distributor is entitled under subsection (a) exceeds the cost of the stamps that the distributor seeks to purchase, the remainder of the credit may be applied to future purchases of stamps by the distributor. For any uncollectible receivable used to establish a credit under subsection (a), the amount of the credit that is available to be applied to a purchase of stamps is the total amount of the credit determined under subsection (a) reduced by the sum of partial credits applied by the distributor to previous purchases of stamps.
(e) As used in this subsection, "affiliated group" means any combination of the following:
(1) An affiliated group within the meaning provided in Section 1504 of the Internal Revenue Code (except that the ownership percentage in Section 1504(a)(2) of the Internal Revenue Code
shall be determined using fifty percent (50%) instead of
eighty percent (80%)) or a relationship described in Section
267(b)(11) of the Internal Revenue Code.
(2) Two (2) or more partnerships (as defined in IC 6-3-1-19), including limited liability companies and limited liability partnerships, that have the same degree of mutual ownership as an affiliated group described in subdivision (1), as determined under the rules adopted by the department.
The right to a credit under this section is not assignable to an individual or entity that is not part of the same affiliated group as the assignor.
partnerships, that have the same degree of mutual ownership
as an affiliated group described in subdivision (1), as
determined under the rules adopted by the department.
The right to a deduction under this section is not assignable to an individual or entity that is not part of the same affiliated group as the assignor.
(d) The following provisions apply to a deduction for a receivable treated as uncollectible debt under subsection (a):
(1) The deduction does not include interest.
(2) The amount of the deduction shall be determined in the manner provided by Section 166 of the Internal Revenue Code for bad debts but shall be adjusted to exclude:
(A) financing charges or interest;
(B) uncollectible amounts on property that remain in the possession of the distributor until the full purchase price is paid;
(C) expenses incurred in attempting to collect any debt; and
(D) repossessed property.
(3) The deduction shall be claimed on the return for the period during which the receivable is written off as uncollectible in the claimant's books and records and is eligible to be deducted for federal income tax purposes. For purposes of this subdivision, a claimant who is not required to file federal income tax returns may deduct an uncollectible receivable on a return filed for the period in which the receivable is written off as uncollectible in the claimant's books and records and would be eligible for a bad debt deduction for federal income tax purposes if the claimant were required to file a federal income tax return.
(4) If the amount of uncollectible receivables claimed as a deduction by a distributor for a particular reporting period exceeds the amount of the distributor's taxable wholesale sales for that reporting period, the distributor may file a refund claim under IC 6-8.1-9. However, the deadline for the refund claim shall be measured from the due date of the return for the reporting period on which the deduction for the uncollectible receivables could first be claimed.
(5) For purposes of reporting a payment received on a previously claimed uncollectible receivable, any payments made on a debt or account shall be applied first proportionally to the taxable wholesale price of the property
and the part of the receivable attributable to the tax imposed by this chapter, and secondly to interest, service charges, and any other charges.