Colorado § 39-28.5-107 - When credit may be obtained for tax paid - repeal.

§ 39-28.5-107. When credit may be obtained for tax paid - repeal.

(1) Where tobacco products, upon which the tax imposed by this article 28.5 has been reported and paid, are shipped or transported by the distributor to retailers without the state to be sold by those retailers, are shipped or transported by the distributor to a consumer without the state on or after January 1, 2021, or are returned to the manufacturer by the distributor or destroyed by the distributor, credit of such tax may be made to the distributor in accordance with regulations prescribed by the department.

(2) (a) Prior to January 1, 2025, credit shall be given by the department to a distributor or remote retail seller for all taxes levied pursuant to this article 28.5 and section 21 of article X of the state constitution and paid pursuant to the provisions of this article 28.5 that are bad debts. Such credit shall offset taxes levied pursuant to this article 28.5 and section 21 of article X of the state constitution and paid pursuant to the provisions of this article 28.5 only. No credit shall be given unless the bad debt has been charged off as uncollectible on the books of the distributor or remote retail seller. Subsequent to receiving the credit, if the distributor or remote retail seller receives a payment for the bad debt, the distributor or remote retail seller shall be liable to the department for the amount received and shall remit this amount in the next payment to the department under section 39-28.5-106.

(b) Any claim for a bad debt credit under this subsection (2) shall be supported by all of the following:

(I) A copy of the original invoice issued by the distributor or remote retail seller;

(II) Evidence that the tobacco products described in the invoice were delivered to the person who ordered them; and

(III) Evidence that the person who ordered and received the tobacco products did not pay the distributor or remote retail seller for them and that the distributor or remote retail seller used reasonable collection practices in attempting to collect the debt.

(c) If credit is given to a distributor or remote retail seller for a bad debt, the person who ordered and received the tobacco products but did not pay the distributor or remote retail seller for them shall be liable in an amount equal to the credit for the tax imposed in this article 28.5 on the tobacco products. Subsequent to receiving the credit, if the distributor or remote retail seller receives a payment for the bad debt and the distributor or remote retail seller makes a payment to the department, the amount of taxes owed by such person shall be reduced by the amount paid to the department.

(d) As used in this subsection (2), "bad debt" means the taxes attributable to any portion of a debt that is related to a sale of tobacco products subject to tax under this article 28.5, that is not otherwise deductible or excludable, that has become worthless or uncollectible in the time after the tax has been paid pursuant to section 39-28.5-106, and that is eligible to be claimed as a deduction pursuant to section 166 of the federal "Internal Revenue Code of 1986", as amended. A bad debt shall not include any interest on the wholesale price of tobacco products, uncollectible amounts on property that remain in the possession of the distributor or remote retail seller until the full purchase price is paid, expenses incurred in attempting to collect any account receivable or any portion of the debt recovered, an account receivable that has been sold to a third party for collection, or repossessed property.

(e) This subsection (2) is repealed, effective December 31, 2028.

Source: L. 86: Entire article added, p. 1115, § 13, effective July 1. L. 2004: Entire section amended, p. 266, § 2, effective August 4. L. 2005: (2)(a) amended, p. 910, § 11, effective June 2; (2)(a) amended, p. 926, § 12, effective June 2. L. 2015: (1) amended, (HB 15-1301), ch. 336, p. 1364, § 3, effective June 5. L. 2020: (1) amended, (HB 20-1427), ch. 248, p. 1196, § 15, effective January 1, 2021. L. 2023: (2)(a), (2)(b)(I), (2)(b)(III), (2)(c), and (2)(d) amended, (HB 23-1015), ch. 142, p. 610, § 7, effective January 1, 2024. L. 2024: (2)(a) amended and (2)(e) added, (HB 24-1036), ch. 373, p. 2533, § 28, effective August 7.

Editor's note: Section 27(2) of chapter 248 (HB 20-1427), Session Laws of Colorado 2020, provides that changes to this section take effect on the date of the governor's proclamation or January 1, 2021, whichever is later, only if, at the November 2020 statewide election, a majority of voters approve the ballot issue referred in accordance with section 39-28-401. The ballot issue, referred to the voters as proposition EE, was approved on November 3, 2020, and was proclaimed by the Governor on December 31, 2020. The vote count for the measure was as follows:

FOR: 2,134,608

AGAINST: 1,025,182

Cross references: (1) For the legislative declaration contained in the 2005 act amending subsection (2)(a), see section 1 of chapter 241, Session Laws of Colorado 2005.

(2) For the short title ("Cigar On-line Sales Equalization Act") and the legislative declaration in HB 15-1301, see sections 1 and 2 of chapter 336, Session Laws of Colorado 2015.

(3) For the legislative declaration in HB 24-1036, see section 1 of chapter 373, Session Laws of Colorado 2024.