S T A T E O F N E W Y O R K
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6267
2011-2012 Regular Sessions
I N A S S E M B L Y
March 11, 2011
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Introduced by M. of A. BING -- read once and referred to the Committee
on Ways and Means
AN ACT to amend the tax law, in relation to the refund of sales and
compensating use taxes paid on certain credit card accounts determined
to be worthless
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Section 1132 of the tax law is amended by adding a new
subdivision (e-1) to read as follows:
(E-1) (1) A VENDOR IS RELIEVED FROM LIABILITY FOR SALES TAX THAT
BECAME DUE AND PAYABLE, INSOFAR AS THE MEASURE OF THE TAX IS REPRESENTED
BY ACCOUNTS THAT HAVE BEEN FOUND TO BE WORTHLESS AND CHARGED OFF FOR
INCOME TAX PURPOSES BY THE VENDOR OR, IF THE VENDOR IS NOT REQUIRED TO
FILE INCOME TAX RETURNS, CHARGED OFF IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES. A VENDOR THAT HAS PREVIOUSLY PAID THE
TAX MAY, UNDER RULES AND REGULATIONS PRESCRIBED BY THE DEPARTMENT, TAKE
AS A DEDUCTION THE AMOUNT FOUND WORTHLESS AND CHARGED OFF BY THE VENDOR.
IF SUCH ACCOUNTS ARE THEREAFTER COLLECTED, IN WHOLE OR IN PART, BY THE
VENDOR, THE AMOUNT COLLECTED SHALL BE INCLUDED IN THE FIRST RETURN FILED
AFTER THE COLLECTION AND THE TAX SHALL BE PAID WITH THE RETURN. FOR
PURPOSES OF THIS SUBDIVISION, THE TERM "VENDOR" SHALL INCLUDE ANY ENTITY
AFFILIATED WITH THE VENDOR UNDER 26 U.S.C. S1504.
(2) A VENDOR SHALL BE CONSIDERED THE VENDOR OF THE TANGIBLE PERSONAL
PROPERTY OR SERVICES GIVING RISE TO A WORTHLESS ACCOUNT EVEN THOUGH THE
PROPERTY OR SERVICES ARE SOLD BY A LEASED DEPARTMENT OR CONCESSION
PROVIDED ALL THE FOLLOWING CONDITIONS ARE MET:
(I) THE LEASED DEPARTMENT OR CONCESSION ACCOUNTS FOR AND PAYS OVER ALL
OF ITS RECEIPTS TO THE LESSOR-VENDOR;
(II) THE LESSOR-VENDOR REPORTS AND REMITS TO THE DEPARTMENT THE TAX ON
ALL OF THE LEASED DEPARTMENT OR CONCESSION'S RECEIPTS; AND
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD09743-01-1
A. 6267 2
(III) THE TRANSFER OF ALL THE RECEIVABLES FROM THE LEASED DEPARTMENT
OR CONCESSION TO THE LESSOR-VENDOR IS MADE WITHOUT ANY DISCOUNT FOR ANY
CREDIT TRANSACTIONS WHICH INVOLVE THE LESSOR-VENDOR'S RECEIVABLES AND
WITHOUT RECOURSE TO THE LEASED DEPARTMENT OR CONCESSION.
(3) (I) IN THE CASE OF ACCOUNTS HELD BY A LENDER, A VENDOR OR LENDER
WHO MAKES PROPER ELECTION PURSUANT TO SUBPARAGRAPH (IV) OF THIS PARA-
GRAPH SHALL BE ENTITLED TO A DEDUCTION OR REFUND OF THE TAX THAT THE
VENDOR HAS PREVIOUSLY REPORTED AND PAID IF ALL OF THE FOLLOWING CONDI-
TIONS ARE MET:
(A) NO DEDUCTION WAS PREVIOUSLY CLAIMED OR ALLOWED ON ANY PORTION OF
THE ACCOUNTS;
(B) THE ACCOUNTS HAVE BEEN FOUND WORTHLESS AND WRITTEN OFF BY THE
LENDER IN ACCORDANCE WITH THE REQUIREMENTS OF PARAGRAPH ONE OF THIS
SUBDIVISION;
(C) THE CONTRACT BETWEEN THE VENDOR AND THE LENDER CONTAINS AN IRREV-
OCABLE RELINQUISHMENT OF ALL RIGHTS TO THE ACCOUNT FROM THE VENDOR TO
THE LENDER; AND
(D) THE PARTY ELECTING TO CLAIM THE DEDUCTION OR REFUND PURSUANT TO
SUBPARAGRAPH (IV) OF THIS PARAGRAPH FILES A CLAIM IN A MANNER PRESCRIBED
BY THE DEPARTMENT.
(II) IF THE VENDOR OR THE LENDER THEREAFTER COLLECTS, IN WHOLE OR IN
PART, ANY ACCOUNTS, ONE OF THE FOLLOWING SHALL APPLY:
(A) IF THE VENDOR IS ENTITLED TO THE DEDUCTION OR REFUND UNDER THE
ELECTION SPECIFIED PURSUANT TO SUBPARAGRAPH (IV) OF THIS PARAGRAPH, THE
VENDOR SHALL INCLUDE THE AMOUNT COLLECTED IN ITS FIRST RETURN FILED
AFTER THE COLLECTION AND PAY TAX ON THAT AMOUNT WITH THE RETURN; OR
(B) IF THE LENDER IS ENTITLED TO THE DEDUCTION OR REFUND UNDER THE
ELECTION SPECIFIED PURSUANT TO SUBPARAGRAPH (IV) OF THIS PARAGRAPH, THE
LENDER SHALL PAY THE TAX TO THE DEPARTMENT;
(III) (A) FOR PURPOSES OF THIS SUBDIVISION, THE TERM "LENDER" SHALL
MEAN ANY OF THE FOLLOWING:
(I) ANY PERSON WHO HOLDS A PRIVATE LABEL CREDIT CARD ACCOUNT WHICH
THAT PERSON PURCHASED DIRECTLY FROM A VENDOR WHO REPORTED THE TAX;
(II) ANY PERSON WHO HOLDS A PRIVATE LABEL CREDIT CARD ACCOUNT PURSUANT
TO THAT PERSON'S CONTRACT DIRECTLY WITH THE VENDOR WHO REPORTED THE TAX;
OR
(III) ANY PERSON WHO IS EITHER AN AFFILIATED ENTITY, UNDER 26 U.S.C.
S1504, OF A PERSON DESCRIBED IN ITEM (I) OR (II) OF THIS CLAUSE, OR AN
ASSIGNEE OF A PERSON DESCRIBED IN SUCH ITEM (I) OR (II).
(B) FOR PURPOSES OF THIS SUBDIVISION, THE TERM "PRIVATE LABEL CREDIT
CARD" MEANS ANY CHARGE CARD OR CREDIT CARD THAT CARRIES, REFERS TO OR IS
BRANDED WITH THE NAME OR LOGO OF A VENDOR AND THAT CAN BE USED FOR
PURCHASES FROM THE VENDOR (OR ANY SUBSIDIARIES OR AFFILIATES THEREOF)
WHOSE NAME OR LOGO APPEARS ON THE CARD. THE RECEIPTS OF SUCH PURCHASES
FROM THE VENDOR WHOSE NAME OR LOGO APPEARS ON THE CREDIT CARD MUST BE
SEPARATELY STATED AND IDENTIFIABLE.
(IV) THE LENDER AND THE VENDOR SHALL FILE A JOINT ELECTION WITH THE
DEPARTMENT, SIGNED BY BOTH PARTIES, DESIGNATING WHICH PARTY IS ENTITLED
TO CLAIM THE DEDUCTION OR REFUND. THIS ELECTION SHALL NOT BE AMENDED OR
REVOKED UNLESS A NEW ELECTION, SIGNED BY BOTH PARTIES, IS FILED WITH THE
DEPARTMENT.
(V) A LENDER MAY HAVE ITS DEDUCTION OR REFUND FOR BAD DEBTS CLAIMED ON
A RETURN FILED BY A MEMBER OF AN AFFILIATED GROUP AS DEFINED UNDER 26
U.S.C. S1504.
A. 6267 3
(4) A VENDOR OR LENDER WHOSE VOLUME AND CHARACTER OF UNCOLLECTIBLE
ACCOUNTS WARRANTS AN ALTERNATIVE METHOD OF SUBSTANTIATING THE DEDUCTION
OR REFUND MAY:
(I) MAINTAIN RECORDS OTHER THAN THE RECORDS REQUIRED BY THE DEPARTMENT
IF THE RECORDS FAIRLY AND EQUITABLY APPORTION TAXABLE AND NONTAXABLE
ELEMENTS AND NEW YORK AND NON-NEW YORK ELEMENTS OF A BAD DEBT AND
COMPUTE THE AMOUNT OF SALES TAX IMPOSED AND REMITTED WITH RESPECT TO THE
NEW YORK TAXABLE CHARGES REMAINING UNPAID ON THE DEBT; OR
(II) IMPLEMENT A SYSTEM TO REPORT ITS FUTURE TAX RESPONSIBILITIES
BASED ON A HISTORICAL PERCENTAGE CALCULATED FROM A SAMPLE OF TRANS-
ACTIONS IF THE SYSTEM UTILIZES RECORDS PROVIDED BY THE VENDOR OR LENDER
CLAIMING THE DEDUCTION OR REFUND.
S 2. This act shall take effect on the first of January next succeed-
ing the date on which it shall have become a law.