Oklahoma § 68-1366 - Deduction from taxable sales for bad debts

§ 68-1366. Deduction from taxable sales for bad debts

A. There is herein provided a deduction to the vendor from

taxable sales for bad debts. Any deduction taken that is attributed

to bad debts shall not include interest.

B. The federal definition of “bad debt” in 26 U.S.C., Section

166 shall be the basis for calculating bad debt recovery. However,

the amount calculated pursuant to 26 U.S.C., Section 166, shall be

adjusted to exclude:

1. Financing charges or interest;

2. Sales or use taxes charged on the purchase price;

3. Uncollectible amounts on property that remain in the

possession of the seller until the full purchase price is paid; and

4. Expenses incurred in attempting to collect any debt and

repossessed property.

C. Bad debts may be deducted on the return for the period

during which the bad debt is written off as uncollectible in the

claimant’s books and records and is eligible to be deducted for

federal income tax purposes if the taxpayer kept accounts on a cash

basis or could be eligible to be claimed if the taxpayer kept

accounts on an accrual basis. For purposes of this subsection, a

claimant who is not required to file federal income tax returns may

deduct a bad debt on a return filed for the period in which the bad

debt 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 was required to file a federal

income tax return.

D. If a deduction is taken for a bad debt and the debt is

subsequently collected in whole or in part, the tax on the amount so

collected must be paid and reported on the return filed for the

period in which the collection is made.

E. When the amount of bad debt exceeds the amount of taxable

sales for the period during which the bad debt is written off, a

refund claim may be filed within the statute of limitations for

Oklahoma Statutes - Title 68. Revenue and Taxation

refund claims provided in Section 227 of this title; however, the

statute of limitations shall be measured from the due date of the

return on which the bad debt could first be claimed.

F. Where filing responsibilities have been assumed by a

certified service provider, the certified service provider may

claim, on behalf of the seller, any bad debt allowance provided by

this section. The certified service provider must credit or refund

the full amount of any bad debt allowance or refund received to the

seller.

G. For the purposes of reporting a payment received on a

previously claimed bad debt, any payments made on a debt or account

are applied first proportionally to the taxable price of the

property or service and the sales tax thereon, and secondly to

interest, service charges, and any other charges.

H. In situations where the books and records of the party

claiming the bad debt allowance support an allocation of the bad

debts among the states which are members of the Streamlined Sales

and Use Tax Agreement, the allocation will be permitted.

Added by Laws 1981, c. 313, § 2, emerg. eff. June 29, 1981. Amended

by Laws 1990, c. 339, § 18, emerg. eff. May 31, 1990; Laws 2003, c.

413, § 15, eff. Nov. 1, 2003.