2013 - 2014 LEGISLATURE
January 21, 2014 - Introduced by Representative Nygren, cosponsored by Senator
Darling. Referred to Committee on Ways and Means.
1An Act to create
77.585 (11) of the statutes; relating to: sales tax bad debt
2return adjustments for private label credit card bad debt.
Analysis by the Legislative Reference Bureau
Under current law, for sales tax purposes, a seller may claim on a sales tax
return a deduction for the amount of any bad debt that the seller writes off as
uncollectible in the seller's books and records, if the amount may be deducted as bad
debt for federal income tax purposes, regardless of whether the seller must file a
federal income tax return.
Under this bill, a lender who extends credit through a private label credit card,
dual purpose credit card, or dealer credit program, may enter into an agreement with
a seller so that the seller, the lender, or the lender's affiliate may claim a deduction
or a refund for bad debt. A private label credit card is any credit card that identifies
a seller's name or logo on the card and that may be used only for purchases from that
seller or from any of the seller's affiliates or franchisees. A dual purpose credit card
is a credit card that may be used as a private label credit card or to make purchases
from persons other than the seller whose name or logo appears on the card. A dealer
credit program is an arrangement for extending credit for a specific purchase from
For further information see the state and local fiscal estimate, which will be
printed as an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
77.585 (11) of the statutes is created to read:
(a) In this subsection:
1. "Dealer credit program" means an arrangement for extending credit for a 4
specific purchase from a seller, not including the purchase of an aircraft, a motor 5
vehicle, a vessel, a motor home, or any other item for which a title is required.
2. "Dual purpose credit card" means a credit card that may be used as a private 7
label credit card or to make purchases from persons other than the seller whose name 8
or logo appears on the card or the seller's affiliates or franchisees, if the credit card 9
issuer is able to determine the sales receipts of the seller and the seller's affiliates 10
or franchisees apart from any sales receipts of unrelated persons.
3. a. "Lender" means any person who owns a private label credit card account, 12
a dual purpose credit card account, or a dealer credit program account, or an interest 13
in a receivable from any such account, if the person purchased the account or interest 14
directly from a seller who remitted the sales or use tax or from the seller's affiliate, 15
the person received the account or interest from a third party, or the person 16
originated the account or interest pursuant to the person's contract with the seller 17
who remitted the sales or use tax or with the seller's affiliate.
b. "Lender" includes any person who is a member of the same affiliated group, 19
as defined under section 1504
of the Internal Revenue Code, as a lender described 20
under subd. 3. a. or is an assignee or other transferee of a lender described under 21
subd. 3. a.
4. "Private label credit card" means any charge card or credit card that 23
identifies a seller's name or logo on the card and that may be used only for purchases 24
from that seller or from any of the seller's affiliates or franchisees.
5. "Seller's affiliate" means any entity that is a member of the same affiliated 2
group, as defined under section 1504
of the Internal Revenue Code, as the seller that 3
may file a single consolidated return for federal income tax purposes.
(b) A lender who extends credit through a private label credit card, dual 5
purpose credit card, or dealer credit program, may enter into an agreement with a 6
seller so that the seller, the lender, or an affiliate of the lender may claim a deduction 7
or a refund for bad debt under sub. (1) if all of the following apply:
1. The seller previously reported and paid the tax due related to the bad debt.
2. No deduction or refund was previously claimed by, or allowed to, either the 10
seller or the lender on the bad debt.
3. The amount for which the seller or lender claims a deduction or refund under 12
sub. (1) is limited to credit sale transactions included in the account or receivable that 13
is charged off on the lender's books and records after December 31, 2013, regardless 14
of the date on which the credit sale transaction occurred.
4. The seller and lender designate which party is entitled to claim the deduction 16
or refund, specify that designation in the written agreement between the seller and 17
the lender, and make the agreement available for review by the department. The 18
written agreement shall also provide that if the party that is entitled to claim the 19
deduction or refund is no longer in business, the other party may claim the deduction 20
(c) A seller or lender who claims a deduction or a refund as provided under this 22
subsection shall maintain adequate books, records, or other documents to support 23
the deduction or refund. A seller or lender shall use one of the following methods for 24
determining the amount of the deduction or refund:
1. An apportionment method that determines the amount of the sales or use 2
tax included in the bad debt to which the deduction or refund applies using the 3
seller's in-state and out-of-state sales, the seller's taxable and nontaxable sales, 4
and the amount of the tax the seller remitted to the state.
2. A specified percentage of the accounts or receivables giving rise to the 6
deduction or refund, if the specified percentage is derived from a sampling of the 7
seller's or lender's records, as appropriate, in accordance with a methodology agreed 8
on by the department and the seller or lender, as appropriate. For purposes of this 9
subdivision, in order to compute the deduction or refund, payments on the accounts 10
or receivables shall be allocated based on the terms and conditions of the contract 11
between the seller or lender and the consumer.
3. A direct method approved by the department.
(d) A seller or lender who claims a deduction or refund as provided under this 14
subsection and who subsequently collects, in whole or in part, any amount for which 15
the deduction or refund was claimed, shall include the taxable percentage of the 16
amount collected and pay the tax on the return filed for the period corresponding to 17
the date when the amount is collected.
(e) A seller's or lender's deduction for tax paid on bad debt may be claimed by 19
an entity related to the seller or lender if the entity is related by a direct or indirect 20
common ownership of 50 percent or more.
(1) This act first applies to taxable years beginning on January 1, 2014.