Section 7247.1 - Refund of sales tax attributed to bad debt(a) A vendor may file a petition for refund of sales tax paid to the department that is attributed to a bad debt if all of the following apply: (1) The purchaser fails to pay the total purchase price.(2) The purchase price is written off, either in whole or in part, as a bad debt on the books and records of the vendor or an affiliate of the vendor.(3) The debt has been deducted for Federal income tax purposes under section 166 of the Internal Revenue Code of 1986 ( Public Law 99-514, 26 U.S.C. § 166 ).(a.1) A petition for refund, which is authorized by this section, must be filed with the department within the time limitations prescribed by section 3003.1(a) . (a.2) In the case of private-label credit card accounts not qualifying under subsection (a), a vendor or lender that makes an election pursuant to subsection (a.3) shall be entitled to file a petition for refund of sales tax that the vendor has previously reported and paid to the department if all of the following conditions are met: (1) No refund was previously allowed with respect to the portion of the account written off as a bad debt.(2) The account has been found worthless and written off, either in whole or in part, as bad debt on the books and records of the lender or an affiliate of the lender.(3) The account has been deducted for Federal income tax purposes under section 166 of the Internal Revenue Code of 1986 ( Public Law 99-514, 26 U.S.C. § 166 ) by the lender or an affiliate of the lender.(a.3) In order to be eligible for a refund under subsection (a.2), the lender and the vendor must execute and file with the department a joint election, signed by both parties, designating which party is entitled to claim the refund. This election may not be revoked unless a written notice is signed by the party that signed the election being revoked and is filed with the department.(b) The refund authorized by this section shall be limited to the sales tax paid to the department that is attributed to the bad debt, less any discount under section 227 of this act. Partial payments by the purchaser shall be prorated between the original purchase price and the sales tax due on the sale. Payments made on any transaction which includes both taxable and nontaxable components shall be allocated proportionally between the taxable and nontaxable components.(c) A vendor or a lender may assign its right to petition and receive a refund of sales tax attributed to a bad debt to an affiliate.(d) No refund shall be granted under this section for any of the following: (iii) Expenses incurred in attempting to collect any amount receivable.(e) Documentation requirements are as follows:(1) Any person claiming a refund under this section shall, on request, make available adequate books, records or other documentation supporting the claimed refund, including: (i) Date of original sale and name and Pennsylvania sales tax license number of the retailer.(ii) Name and address of purchaser.(iii) Amount that the purchaser paid or agreed to pay.(iv) Taxable and nontaxable charges.(v) Amount on which the retailer reported and paid sales tax.(vi) All payments or other credits applied to the account of the purchaser.(vii) Evidence that the uncollected amount has been designated as a bad debt in the books and records of the vendor or lender, as appropriate, and that the amount has been claimed as a bad debt deduction for Federal income tax purposes.(viii) The county in which any local sales tax was incurred.(ix) The unpaid portion of the sales price.(x) A certification, under penalty of perjury, that no person has collected money on the bad debt for which the refund is claimed.(xi) Any other information required by the department.(2) A person claiming a refund under this section may provide alternative forms of documentation acceptable to the department if appropriate in light of the volume and character of uncollectible accounts. This includes the following:(i) If a vendor remits sales or use tax to the Commonwealth and to another state, the entity claiming a refund under this section may use an apportionment method to substantiate the amount of Pennsylvania tax included in the bad debts to which the refund applies.(ii) The apportionment method must use the vendor's Pennsylvania and non-Pennsylvania sales, the vendor's taxable and nontaxable sales and the amount of tax the vendor remitted to Pennsylvania.(f) The following apply: (1) If the purchase price that is attributed to a prior bad debt refund is thereafter collected, in whole or in part by the vendor or lender, or an affiliate of the vendor or lender, the entity claiming the refund shall remit the proportional tax to the department with the first return filed after the collection. If the entity is not required to file periodic returns, the entity shall remit the proportional tax to the department with another return pursuant to section 217(c) . (2) Any consideration received for the assignment, sale or other transfer of a bad debt with respect to which a refund has been granted shall be deemed to be a collection of a prior bad debt. This paragraph shall not apply to a transfer to an entity that is part of the same affiliated group, as defined by section 1504 of the Internal Revenue Code of 1986 ( Public Law 99-514, 26 U.S.C. § 1504 ).(3) A person that collects, in whole or in part, the purchase price attributed to a prior bad debt refund is required to maintain adequate books, records or other documentation to allow the department to determine whether the purchase price attributed to a prior bad debt refund has been collected. Information under this paragraph includes the pertinent facts required by subsection (e).(4) If it is determined by the department that a prior bad debt has been collected, in whole or in part, and the proportional tax has not been properly reported and paid to the department, the person that claimed the refund on the transaction shall report and pay the proportional tax to the department plus applicable interest and penalty under this article.(g) Notwithstanding the provisions of section 806.1 of the act of April 9, 1929 (P.L. 343, No. 176), known as "The Fiscal Code," no interest shall be paid by the Commonwealth on refunds of sales tax attributed to bad debt under this section.(h) No refund or credit of sales tax shall be made for any uncollected purchase price or bad debt except as authorized by this section. No deduction or credit for bad debt may be taken on any return filed with the department. This section shall provide the exclusive procedure for claiming a refund or credit of sales tax attributed to uncollected purchase price or bad debt.(i) As used in this section, the following words and phrases shall have the meanings given to them in this subsection: (1) "Affiliate." A person that is: (i) an affiliated entity, under section 1504 of the Internal Revenue Code of 1986, of a vendor; or(ii) a person described in paragraph (2)(i) or (ii) that would be an affiliated entity, under section 1504 of the Internal Revenue Code of 1986, of a vendor but for the fact the person is not a corporation, an assignee or another transferee of a person described in paragraph (2)(i) or (ii).(2) "Lender." Any of the following: (i) A person that owns or has owned a private-label credit card account purchased directly from a vendor that reported the tax under this article.(ii) A person that owns or has owned a private-label credit card account pursuant to a contract directly with the vendor that reported the tax under this article.(iii) A person that is: (A) an affiliate of a person described in subparagraph (i) or (ii); or(B) an assignee or other transferee of a person described in subparagraph (i) or (ii).(3) "Private-label credit card." Any charge card, credit card or other instrument serving similar purpose which carries, refers to or is branded with the name or logo of a vendor and which can be used for purchases from the vendor. The term does not include a card or instrument which may also be used to make purchases from persons other than the vendor whose name or logo appears on the card or instrument or that vendor's affiliates. Nothing in this paragraph authorizes a refund with respect to bad debts attributable to sales by unrelated persons referred to in this paragraph.1971, March 4, P.L. 6, No. 2, § 247.1, added 1999, May 12, P.L. 26, No. 4, §4, imd. effective. Amended 2000 , May 24, P.L. 106, No. 23, § 5, imd. effective; 2001 , June 22, P.L. 353, No. 23, §3, effective 7/1/2001; 2006, Oct. 18, P.L. 1149, No. 119, § 3, imd. effective; 2007, July 25, P.L. 373, No. 55, § 2, imd. effective.