Section 48-8-45. Reporting cash and credit sales; change of basis of accounting; payment of tax at time of filing return under cash basis of accounting; deduction of bad debts under accrual basis of accounting; availability of refund; bad debt deduction or refund nonassignable; allocation of bad debts

   (a) Any dealer taxable under this article having both cash and credit sales may report the sales on either the cash or accrual basis of accounting. Each election of a basis of accounting shall be made on the first return filed and, once made, the election shall be irrevocable unless the commissioner grants written permission for a change. Permission for a change in the basis of accounting shall be granted only upon written application and under rules and regulations promulgated by the commissioner.

(b) Any dealer reporting on a cash basis of accounting shall include in each return all cash sales made during the period covered by the return and all collections made in any period on credit sales of prior periods and shall pay the tax on the sales at the time of filing the return.

(c) Any dealer reporting on the accrual basis of accounting shall be allowed a deduction for bad debts under rules and regulations of the commissioner. Any deduction taken or refund claimed that is attributed to bad debts shall not accrue or include interest.

(d) The bad debt may be deducted on the return for the period during which the bad debt is written off as uncollectable in the claimant's books and records and is eligible to be deducted for federal income tax purposes. Any such deduction for such bad debt shall be reported as a separate line item on the claimant's sales and use tax return. If such deduction is not reported as a line item, it shall be disallowed. 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 uncollectable in the claimant's books and records and the claimant 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.

(e) 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. 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.

(f) (1) As used in this subsection, "assignee" includes but is not limited to:

      (A) Assignees of promissory notes, accounts, or accounts receivable; or

      (B) Financial institutions that do not make taxable retail sales but that finance retail sales by making loans or issuing credit cards to purchasers.

   (2) The deduction and refund provided for in this Code section are not assignable. The deduction and refund provided for in this Code section are only available to a dealer that makes a taxable retail sale, remits tax on that sale, and subsequently incurs a bad debt with respect to that sale. Assignees may not take a deduction or claim a refund pursuant to this Code section.

(g) For purposes of calculating the deduction taken or refund claimed, a "bad debt" shall have the same meaning as defined in 26 U.S.C. Section 166. 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) Uncollectable amounts on property that remain in the possession of the seller until the full purchase price is paid;

   (4) Expenses incurred in attempting to collect any debt; and

   (5) Repossessed property.

(h) For bad debts incurred and written off after January 1, 2011, 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. The statute of limitations for filing such claim shall be three years from the due date of the return on which the bad debt could first be claimed. Such refund shall be claimed on such form as shall be established by the commissioner.

(i) Where filing responsibilities have been assumed by a certified service provider, the department allows the service provider to claim, on behalf of the seller, any bad debt allowance provided by this Code section. Such refund shall be claimed on such form as shall be established by the commissioner. The certified service provider must credit or refund the full amount of any bad debt allowance or refund received to the seller.

(j) Where the books and records of the party claiming the bad debt allowance support an allocation of the bad debts among the Streamlined Sales Tax member states, such allocation is permitted.

Ga. L. 1951, p. 360, § 14; Code 1933, § 91A-4518, enacted by Ga. L. 1978, p. 309, § 2; Ga. L. 1998, p. 604, § 1; Ga. L. 2008, p. 340, § 3/HB 948; Ga. L. 2010, p. 662, § 12/HB 1221; Ga. L. 2011, p. 38, § 6/HB 168.