Administrative Code

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Virginia Administrative Code
Title 23. Taxation
Agency 10. Department of Taxation
Chapter 210. Retail Sales and Use Tax

23VAC10-210-160. Bad debts.

A. Generally. Any dealer may obtain a credit for the amount of any sales or use tax previously reported and paid on a return for accounts found to be worthless. Such credit must be claimed on the return filed for the period in which the account is determined to be worthless.

B. Limitations. No credit may exceed the amount of sales price which is actually uncollectible. Prior payments made to the dealer on a debt which is subsequently determined to be uncollectible must be allocated to the sales price, sales tax and other nontaxable charges based on the percentage that those charges represent to the total debt originally owed.

If any part of the sales price for which a credit was taken is subsequently reported to the dealer, it must be included in such dealer's next sales and use tax return.

The following example illustrates the operation of this section.

Example: Dealer A repairs an item of property for a customer. The total charge for such repair is $77.65, representing $50 in repair parts, $25 in separately stated, nontaxable repair labor, and $2.65 in tax. A reports the transaction and remits the tax thereon. After collecting $30, A determines that the remainder of the debt is uncollectible. A may claim a credit calculated as follows:

Allocation of Amount Previously Collected:

50 / 77.65 x $30

Amount to be Allocated to Repair Parts = $19.32

Amount of Sales Price for Computing Credit = $50.00 - $19.32 = $30.68

Amount of Credit which may be claimed = $1.63 (5.3% x $30.68)

Since only the charge for the repair parts was previously reported as a taxable sale, only the tax on that portion of the remaining outstanding debt attributable to the charge for such parts may be taken as a credit. If any portion of the $30.68 remaining sales price is subsequently collected, such amount must be reported on the dealer's return for the period in which collected.

C. Hampton Roads Region and Northern Virginia Region. The total rate of the state and local sales and use tax in localities that fall within these regions is 6.0% (4.3% state, 0.7% regional, and 1.0% local). The provisions of this section apply to transactions sourced to the Hampton Roads Region and the Northern Virginia Region, mutatis mutandis. For definitions of the "Hampton Roads Region" and the "Northern Virginia Region" see 23VAC10-210-2070.

Statutory Authority

§ 58.1-203 of the Code of Virginia.

Historical Notes

Derived from VR630-10-11; revised January 1, 1979; January 1, 1985; amended, Virginia Register Volume 32, Issue 22, eff. September 12, 2016.

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