GENERAL SALES TAX ACT
Act 167 of 1933
205.54i Bad debt; definitions; deduction; amount; payment of bad debt; liability; written election designating party claiming deduction; evidence required to support claim for deduction; change in tax rate; review; taxpayer under streamlined sales and use tax agreement.
Sec. 4i.
(1) As used in this section:
(a) "Bad debt" means any portion of a debt that is related to a sale at retail taxable under this act for which gross proceeds are not otherwise deductible or excludable and that is eligible to be claimed, or could be eligible to be claimed if the taxpayer kept accounts on an accrual basis, as a deduction pursuant to section 166 of the internal revenue code, 26 USC 166. A bad debt shall not include any finance charge, interest, or sales tax on the purchase price, uncollectible amounts on property that remains in the possession of the taxpayer until the full purchase price is paid, expenses incurred in attempting to collect any account receivable or any portion of the debt recovered, any accounts receivable that have been sold to and remain in the possession of a third party for collection, and repossessed property.
(b) Except as provided in subdivision (c), "lender" includes any of the following:
(i) Any person who holds or has held an account receivable which that person purchased directly from a taxpayer who reported the tax.
(ii) Any person who holds or has held an account receivable pursuant to that person's contract directly with the taxpayer who reported the tax.
(iii) The issuer of the private label credit card.
(c) "Lender" does not include the issuer of a credit card or instrument that can be used to make purchases from a person other than the vendor whose name or logo appears on the card or instrument or that vendor's affiliates.
(d) "Private label credit card" means any charge card, credit card, or other instrument serving a similar purpose that carries, refers to, or is branded with the name or logo of a vendor and that can only be used for purchases from the vendor.
(e) "Taxpayer" means a person that has remitted sales tax directly to the department on the specific sales at retail transaction for which the bad debt is recognized for federal income tax purposes or, after September 30, 2009, a lender holding the account receivable for which the bad debt is recognized, or would be recognized if the claimant were a corporation, for federal income tax purposes.
(2) In computing the amount of tax levied under this act for any month, a taxpayer may deduct the amount of bad debts from his or her gross proceeds used for the computation of the tax. The amount of gross proceeds deducted must be charged off as uncollectible on the books and records of the taxpayer at the time the debt becomes worthless and 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 must be eligible to be deducted for federal income tax purposes. For purposes of this section, a claimant who is not required to file a federal income tax return may deduct a bad debt on a return filed for the period in which the bad debt becomes worthless and 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. If a consumer or other person pays all or part of a bad debt with respect to which a taxpayer claimed a deduction under this section, the taxpayer is liable for the amount of taxes deducted in connection with that portion of the debt for which payment is received and shall remit these taxes in his or her next payment to the department. Any payments made on a bad debt shall be applied proportionally first to the taxable price of the property and the tax on the property and second to any interest, service, or other charge.
(3) After September 30, 2009, if a taxpayer who reported the tax and a lender execute and maintain a written election designating which party may claim the deduction, a claimant is entitled to a deduction or refund of the tax related to a sale at retail that was previously reported and paid if all of the following conditions are met:
(a) No deduction or refund was previously claimed or allowed on any portion of the account receivable.
(b) The account receivable has been found worthless and written off by the taxpayer that made the sale or the lender on or after September 30, 2009.
(4) Any claim for a bad debt deduction under this section shall be supported by that evidence required by the department. The department shall review any change in the rate of taxation applicable to any taxable sales by a taxpayer claiming a deduction pursuant to this section and shall ensure that the deduction on any bad debt does not result in the taxpayer claiming the deduction recovering any more or less than the taxes imposed on the sale that constitutes the bad debt.
(5) If a certified service provider assumed filing responsibility under the streamlined sales and use tax administration act, 2004 PA 174, MCL 205.801 to 205.833, the certified service provider may claim, on behalf of the taxpayer, any bad debt allowable to the taxpayer and shall credit or refund that amount of bad debt allowed or refunded to the taxpayer.
(6) If the books and records of a taxpayer under the streamlined sales and use tax agreement under the streamlined sales and use tax administration act, 2004 PA 174, MCL 205.801 to 205.833, that claims a bad debt allowance support an allocation of the bad debts among member states of that agreement, the taxpayer may allocate the bad debts.
History: Add. 1982, Act 23, Eff. Jan. 1, 1984 ;-- Am. 2004, Act 173, Eff. Sept. 1, 2004 ;-- Am. 2007, Act 105, Imd. Eff. Oct. 1, 2007
Compiler's Notes:
Former MCL 205.54i, pertaining to tax exemption for qualified passenger automobile, claims for reimbursement, and sales agreements, expired by its own terms on August 1, 1980. Subsection (5) of former MCL 205.54i read:
"This section shall expire August 1, 1980, except that it shall be effective for bona fide purchase orders submitted to and accepted by, before August 1, 1980, a person subject to tax under this act."
Enacting section 1 of 2007 PA 105 provides:
"Enacting section 1. This amendatory act is curative and shall be retroactively applied, expressing the original intent of the legislature that a deduction for a bad debt for a taxpayer under the general sales tax act, 1933 PA 167, MCL 205.51 to 205.78, is available exclusively to those persons with the legal liability to remit the tax on the specific sale at retail for which the bad debt deduction is recognized for federal income tax purposes, and correcting any misinterpretation of the meaning of the term "taxpayer" that may have been caused by the Michigan court of appeals decision in Daimler Chrysler Services North America LLC v Department of Treasury, No. 264323. However, this amendatory act is not intended to affect a refund required by a final order of a court of competent jurisdiction for which all rights of appeal have been exhausted or have expired if the refund is payable without interest and after September 30, 2009 and before November 1, 2009."
Notes of Decisions
Santander Consum. USA Inc v. State Treasurer, 918 N.W.2d 662 (Mich. 2018).
· cites it 34× “**488 Plaintiffs are financing companies that seek tax refunds under Michigan's bad-debt statute, MCL 205.54i, for taxes paid on vehicles financed through installment contracts.”
Santander Consum. USA Inc v. State Treasurer, 317 Mich. App. 316 (Mich. Ct. App. 2016).
· cites it 21× “116(0(10) and determining that there was no genuine issue of material fact that Ally was not entitled to a “bad debt” tax credit under MCL 205.54i. In Docket Nos. 327832 and 327833, plaintiff, Santander Consumer USA, Inc.”
Menard Inc. v. Dep't of Treasury, 302 Mich. App. 467 (Mich. Ct. App. 2013).
· cites it 13× “In these consolidated appeals, the issue presented is whether plaintiffs, as retailers, are entitled to a refund pursuant to the bad debt provision, MCL 205.54i, of Michigan’s General Sales Tax Act (GSTA), MCL 205.”
GMAC LLC v. Dep't of Treasury, 781 N.W.2d 310 (Mich. Ct. App. 2009).
“The hearing referee and the Court of Claims denied the plaintiffs requested relief, concluding that the plaintiff, as the financing provider, did not constitute a taxpayer for purposes of MCL 205.54i, and that an assignee did not achieve the status of a person subject to the act…”
World Book, Inc v. Dep't of Treasury, 590 N.W.2d 293 (Mich. 1999).
“4 MCL 205.54i(2); MSA 7.525(9)(2) provides: In computing the amount of tax levied under this act for any month, 1 a taxpayer may deduct the amount of bad debts from his or her gross proceeds used for the computation of the tax.”
World Book, Inc v. Dep't of Treasury, 564 N.W.2d 82 (Mich. Ct. App. 1997).
“; MSA 7.521 et seq. The significance of the distinction is that the General Sales Tax Act includes a provision allowing bad debts to be deducted from the gross proceeds used to calculate sales tax liability, MCL 205.”
Td Auto Fin. LLC v. State Treasurer (Mich. Ct. App. 2020).
· cites it 14× “Plaintiff is a financing company that financed the purchase of vehicles from various automobile dealers. The vehicle purchasers would enter into a retail installment contract with the dealer which would assign its interest in the contract to plaintiff in exchange for full…”
Capital One Na v. State Treasurer (Mich. Ct. App. 2018).
· cites it 13× “On September 27, 2013, Capital One submitted a letter to defendants requesting a refund pursuant to MCL 205.54i “for the period of October 1, 2009 through June 30, 2013 in the amount of -1- $8,691,658.”
Capital One Na v. State Treasurer (Mich. Ct. App. 2018).
· cites it 13× “On September 27, 2013, Capital One submitted a letter to defendants requesting a refund pursuant to MCL 205.54i “for the period of October 1, 2009 through June 30, 2013 in the amount of -1- $8,691,658.”
S Abraham & Sons, Inc. v. Dep't of Treasury Gitzen Co., 677 N.W.2d 31 (Mich. Ct. App. 2004).
“each other, World Book, supra at 406 , citing Elias Bros Restaurants, Inc v Treasury Dep’t, 452 Mich 144, 153 ; 549 NW2d 837 (1996), the gsta expressly permitted the *18 seller to deduct bad debts when calculating its tax liability, MCL 205.54i, whereas the UTA contained no such…”
Capital One Na v. State Treasurer (Mich. Ct. App. 2020).
· cites it 11× “-1- that the debt owned by plaintiff is deemed worthless and subsequently charged off by plaintiff, 2 MCL 205.54i provides an avenue for companies like plaintiff to seek a refund from the Department for the taxes they financed.”
— Mich. Comp. Laws § 205.54i(1) — 1 case
— Mich. Comp. Laws § 205.54i(1)(a) — 5 cases
Santander Consum. USA Inc v. State Treasurer, 918 N.W.2d 662 (Mich. 2018).
“**488 Plaintiffs are financing companies that seek tax refunds under Michigan's bad-debt statute, MCL 205.54i, for taxes paid on vehicles financed through installment contracts.”
Santander Consum. USA Inc v. State Treasurer, 317 Mich. App. 316 (Mich. Ct. App. 2016).
“116(0(10) and determining that there was no genuine issue of material fact that Ally was not entitled to a “bad debt” tax credit under MCL 205.54i. In Docket Nos. 327832 and 327833, plaintiff, Santander Consumer USA, Inc.”
Capital One Na v. State Treasurer (Mich. Ct. App. 2018).
“On September 27, 2013, Capital One submitted a letter to defendants requesting a refund pursuant to MCL 205.54i “for the period of October 1, 2009 through June 30, 2013 in the amount of -1- $8,691,658.”
Capital One Na v. State Treasurer (Mich. Ct. App. 2018).
“On September 27, 2013, Capital One submitted a letter to defendants requesting a refund pursuant to MCL 205.54i “for the period of October 1, 2009 through June 30, 2013 in the amount of -1- $8,691,658.”
Capital One Na v. State Treasurer (Mich. Ct. App. 2020).
“-1- that the debt owned by plaintiff is deemed worthless and subsequently charged off by plaintiff, 2 MCL 205.54i provides an avenue for companies like plaintiff to seek a refund from the Department for the taxes they financed.”
— Mich. Comp. Laws § 205.54i(1)(d) — 2 cases
Capital One Na v. State Treasurer (Mich. Ct. App. 2018).
“On September 27, 2013, Capital One submitted a letter to defendants requesting a refund pursuant to MCL 205.54i “for the period of October 1, 2009 through June 30, 2013 in the amount of -1- $8,691,658.”
Capital One Na v. State Treasurer (Mich. Ct. App. 2018).
“On September 27, 2013, Capital One submitted a letter to defendants requesting a refund pursuant to MCL 205.54i “for the period of October 1, 2009 through June 30, 2013 in the amount of -1- $8,691,658.”
— Mich. Comp. Laws § 205.54i(1)(e) — 2 cases
Santander Consum. USA Inc v. State Treasurer, 918 N.W.2d 662 (Mich. 2018).
“**488 Plaintiffs are financing companies that seek tax refunds under Michigan's bad-debt statute, MCL 205.54i, for taxes paid on vehicles financed through installment contracts.”
— Mich. Comp. Laws § 205.54i(2) — 7 cases
Santander Consum. USA Inc v. State Treasurer, 918 N.W.2d 662 (Mich. 2018).
“**488 Plaintiffs are financing companies that seek tax refunds under Michigan's bad-debt statute, MCL 205.54i, for taxes paid on vehicles financed through installment contracts.”
Menard Inc. v. Dep't of Treasury, 302 Mich. App. 467 (Mich. Ct. App. 2013).
“In these consolidated appeals, the issue presented is whether plaintiffs, as retailers, are entitled to a refund pursuant to the bad debt provision, MCL 205.54i, of Michigan’s General Sales Tax Act (GSTA), MCL 205.”
World Book, Inc v. Dep't of Treasury, 590 N.W.2d 293 (Mich. 1999).
“4 MCL 205.54i(2); MSA 7.525(9)(2) provides: In computing the amount of tax levied under this act for any month, 1 a taxpayer may deduct the amount of bad debts from his or her gross proceeds used for the computation of the tax.”
Td Auto Fin. LLC v. State Treasurer (Mich. Ct. App. 2020).
“Plaintiff is a financing company that financed the purchase of vehicles from various automobile dealers. The vehicle purchasers would enter into a retail installment contract with the dealer which would assign its interest in the contract to plaintiff in exchange for full…”
— Mich. Comp. Laws § 205.54i(3) — 6 cases
Santander Consum. USA Inc v. State Treasurer, 317 Mich. App. 316 (Mich. Ct. App. 2016).
“116(0(10) and determining that there was no genuine issue of material fact that Ally was not entitled to a “bad debt” tax credit under MCL 205.54i. In Docket Nos. 327832 and 327833, plaintiff, Santander Consumer USA, Inc.”
Santander Consum. USA Inc v. State Treasurer, 918 N.W.2d 662 (Mich. 2018).
“**488 Plaintiffs are financing companies that seek tax refunds under Michigan's bad-debt statute, MCL 205.54i, for taxes paid on vehicles financed through installment contracts.”
Menard Inc. v. Dep't of Treasury, 302 Mich. App. 467 (Mich. Ct. App. 2013).
“In these consolidated appeals, the issue presented is whether plaintiffs, as retailers, are entitled to a refund pursuant to the bad debt provision, MCL 205.54i, of Michigan’s General Sales Tax Act (GSTA), MCL 205.”
Capital One Na v. State Treasurer (Mich. Ct. App. 2018).
“On September 27, 2013, Capital One submitted a letter to defendants requesting a refund pursuant to MCL 205.54i “for the period of October 1, 2009 through June 30, 2013 in the amount of -1- $8,691,658.”
Capital One Na v. State Treasurer (Mich. Ct. App. 2018).
“On September 27, 2013, Capital One submitted a letter to defendants requesting a refund pursuant to MCL 205.54i “for the period of October 1, 2009 through June 30, 2013 in the amount of -1- $8,691,658.”
— Mich. Comp. Laws § 205.54i(3)(a) — 1 case
Capital One Na v. State Treasurer (Mich. Ct. App. 2020).
“-1- that the debt owned by plaintiff is deemed worthless and subsequently charged off by plaintiff, 2 MCL 205.54i provides an avenue for companies like plaintiff to seek a refund from the Department for the taxes they financed.”
— Mich. Comp. Laws § 205.54i(3)(b) — 1 case
Td Auto Fin. LLC v. State Treasurer (Mich. Ct. App. 2020).
“Plaintiff is a financing company that financed the purchase of vehicles from various automobile dealers. The vehicle purchasers would enter into a retail installment contract with the dealer which would assign its interest in the contract to plaintiff in exchange for full…”
— Mich. Comp. Laws § 205.54i(4) — 8 cases
Santander Consum. USA Inc v. State Treasurer, 918 N.W.2d 662 (Mich. 2018).
“**488 Plaintiffs are financing companies that seek tax refunds under Michigan's bad-debt statute, MCL 205.54i, for taxes paid on vehicles financed through installment contracts.”
Santander Consum. USA Inc v. State Treasurer, 317 Mich. App. 316 (Mich. Ct. App. 2016).
“116(0(10) and determining that there was no genuine issue of material fact that Ally was not entitled to a “bad debt” tax credit under MCL 205.54i. In Docket Nos. 327832 and 327833, plaintiff, Santander Consumer USA, Inc.”
Td Auto Fin. LLC v. State Treasurer (Mich. Ct. App. 2020).
“Plaintiff is a financing company that financed the purchase of vehicles from various automobile dealers. The vehicle purchasers would enter into a retail installment contract with the dealer which would assign its interest in the contract to plaintiff in exchange for full…”
Capital One Na v. State Treasurer (Mich. Ct. App. 2018).
“On September 27, 2013, Capital One submitted a letter to defendants requesting a refund pursuant to MCL 205.54i “for the period of October 1, 2009 through June 30, 2013 in the amount of -1- $8,691,658.”
Capital One Na v. State Treasurer (Mich. Ct. App. 2018).
“On September 27, 2013, Capital One submitted a letter to defendants requesting a refund pursuant to MCL 205.54i “for the period of October 1, 2009 through June 30, 2013 in the amount of -1- $8,691,658.”
— Mich. Comp. Laws § 205.54i(d) — 1 case
Capital One Na v. State Treasurer (Mich. Ct. App. 2020).
“-1- that the debt owned by plaintiff is deemed worthless and subsequently charged off by plaintiff, 2 MCL 205.54i provides an avenue for companies like plaintiff to seek a refund from the Department for the taxes they financed.”
— Mich. Comp. Laws § 205.54i(l)(a) — 2 cases
Menard Inc. v. Dep't of Treasury, 302 Mich. App. 467 (Mich. Ct. App. 2013).
“In these consolidated appeals, the issue presented is whether plaintiffs, as retailers, are entitled to a refund pursuant to the bad debt provision, MCL 205.54i, of Michigan’s General Sales Tax Act (GSTA), MCL 205.”
Santander Consum. USA Inc v. State Treasurer, 317 Mich. App. 316 (Mich. Ct. App. 2016).
“116(0(10) and determining that there was no genuine issue of material fact that Ally was not entitled to a “bad debt” tax credit under MCL 205.54i. In Docket Nos. 327832 and 327833, plaintiff, Santander Consumer USA, Inc.”
— Mich. Comp. Laws § 205.54i(l)(b) — 1 case
Menard Inc. v. Dep't of Treasury, 302 Mich. App. 467 (Mich. Ct. App. 2013).
“In these consolidated appeals, the issue presented is whether plaintiffs, as retailers, are entitled to a refund pursuant to the bad debt provision, MCL 205.54i, of Michigan’s General Sales Tax Act (GSTA), MCL 205.”
— Mich. Comp. Laws § 205.54i(l)(e) — 1 case
Menard Inc. v. Dep't of Treasury, 302 Mich. App. 467 (Mich. Ct. App. 2013).
“In these consolidated appeals, the issue presented is whether plaintiffs, as retailers, are entitled to a refund pursuant to the bad debt provision, MCL 205.54i, of Michigan’s General Sales Tax Act (GSTA), MCL 205.”
Annotations are extracted automatically from the opinions in the
Syfert caselaw corpus and ranked by authority, recency, and
treatment. Dots show Syfertize treatment of the citing case itself.