HB5250 - Relating to a refund of motor vehicle sales taxes paid on certain bad debt.

  89R15375 CJD-F     By: Longoria H.B. No. 5250       A BILL TO BE ENTITLED   AN ACT   relating to a refund of motor vehicle sales taxes paid on certain   bad debt.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Subchapter C, Chapter 152, Tax Code, is amended   by adding Section 152.049 to read as follows:           Sec.   152.049.     REFUND FOR TAX PAID ON BAD DEBT. (a)   In this   section:                 (1)     "Bad debt" means the unpaid balance of an account   associated with a retail installment transaction that was charged   off for federal income tax purposes.                 (2)  "Lender" means a person:                       (A)     that holds or previously held a retail   account purchased directly from a seller required by this chapter   to collect the sales tax imposed by Section 152.021 who remitted the   tax to the tax assessor-collector; and                       (B)  that:                             (i)     is an authorized lender under Chapter   341, Finance Code; or                             (ii)     holds a motor vehicle sales finance   license under Subchapter F, Chapter 348, Finance Code.                 (3)     "Passenger car" means a motor vehicle used to   transport persons and designed to accommodate 10 or fewer   passengers, including the operator.                 (4)     "Retail installment transaction" has the meaning   assigned by Section 348.001, Finance Code.           (b)     A seller who is required by this chapter to collect the   sales tax imposed by Section 152.021 may file a claim with and is   entitled to receive from the comptroller a refund of sales taxes   paid on the seller's bad debt in the amount computed under   Subsection (c) if:                 (1)     the tax was remitted to the tax assessor-collector   on a passenger car sold in a retail installment transaction;                 (2)     the account associated with the debt is determined   to be worthless; and                 (3)     the account associated with the debt is written   off as a bad debt on the accounting books and actually charged off   for federal tax purposes.           (c)     The amount of the refund is equal to the amount computed   by:                 (1)     allocating the bad debt between taxable and   nontaxable charges in a manner that is proportional to the   allocation of taxable and nontaxable charges the purchaser agreed   to pay in a retail installment transaction; and                 (2)     multiplying the amount of the bad debt allocated   to taxable charges as determined under Subdivision (1) by the tax   rate prescribed by Section 152.021.           (d)     If the seller assigns the retail installment contract to   a lender in a retail installment transaction, the lender may file a   claim with and is entitled to receive from the comptroller the   refund under Subsection (b), provided that:                 (1)     the requirements of Subsection (b) are satisfied   by the seller or the lender; and                 (2)     the seller has not received a refund for sales   taxes paid on the bad debt that is the subject of the lender's   claim.           (e)     If after receiving a refund under this section a seller   or lender collects all or part of the bad debt for which the seller   or lender claimed the refund, the seller or lender shall deduct from   the next claim for a refund the seller or lender files under this   section an amount equal to the amount computed by:                 (1)     allocating the amount collected by the seller or   lender between taxable and nontaxable charges in the same manner as   the bad debt is allocated under Subsection (c)(1); and                 (2)     multiplying the amount collected by the seller or   lender allocated to taxable charges as determined under Subdivision   (1) by the tax rate prescribed by Section 152.021.           (f)     A seller or lender claiming a refund under this section   must maintain and make available to the comptroller the following   information relating to the retail installment transaction to which   the refund relates:                 (1)     the name and general distinguishing number of the   seller who remitted the sales tax to the tax assessor-collector;                 (2)     the amount the purchaser agreed to pay in the   retail installment transaction;                 (3)     a copy of the application for registration or   application for title submitted to the tax assessor-collector;                 (4)     a copy of the title receipt issued by the tax   assessor-collector; and                 (5)     any additional information requested by the   comptroller to verify the refund claim.           (g)  This section does not apply to a seller-financed sale.          SECTION 2.  The change in law made by this Act does not   affect tax liability accruing before the effective date of this   Act.  That liability continues in effect as if this Act had not been   enacted, and the former law is continued in effect for the   collection of taxes due and for civil and criminal enforcement of   the liability for those taxes.          SECTION 3.  This Act takes effect September 1, 2025.