CCH Tax Day Report
The Tennessee Supreme Court has declined to review a Court of Appeals’ decision holding that a taxpayer’s claims for a sales tax deduction for bad debts associated with private label and co-branded credit card programs were properly denied. The bad debt statute was amended during the time period covered by the audit, and the Court of Appeals had determined that the taxpayer was not entitled to take the bad debt deduction under either version of the law. Under the prior version of the law, the taxpayer was not a dealer that had any interest in the accounts that were charged off, and under the amended bad debt statute, which requires that the bad debt be written off in the claimant’s books and records, the bank that had issued the credit cards had charged off the accounts on its books and records. The appellate court had held that the taxpayer and the bank were not a group or combination acting as a unit, but were instead independent contractors under the terms of their agreement, and as such, the taxpayer was also not entitled to take the bad debt deduction under the amended version of the law.
Sears, Roebuck & Co. v. Roberts, Tennessee Supreme Court, No. M2014-02567-SC-R11-CV, discretionary review denied, September 23, 2016