When credit may be obtained for tax paid
(1) Where tobacco products, upon which the tax imposed by this article has
been reported and paid, are shipped or transported by the distributor
to retailers without the state to be sold by those retailers, are shipped
or transported by the distributor to a consumer without the state on or
after September 1, 2015, but prior to September 1, 2018, or are returned
to the manufacturer by the distributor or destroyed by the distributor,
credit of such tax may be made to the distributor in accordance with regulations
prescribed by the department.
(2) (a) Credit shall be given by the department to a distributor for all taxes
levied pursuant to this article and
section 21 of article X of the state constitution and paid pursuant to the provisions of this article that are bad debts.
Such credit shall offset taxes levied pursuant to this article and
section 21 of article X of the state constitution and paid pursuant to the provisions of this article only. No credit shall
be given unless the bad debt has been charged off as uncollectible on
the books of the distributor. Subsequent to receiving the credit, if the
distributor receives a payment for the bad debt, the distributor shall
be liable to the department for the amount received and shall remit this
amount in the next payment to the department under
(b) Any claim for a bad debt credit under this subsection (2) shall be supported
by all of the following:
(I) A copy of the original invoice issued by the distributor;
(II) Evidence that the tobacco products described in the invoice were delivered
to the person who ordered them; and
(III) Evidence that the person who ordered and received the tobacco products
did not pay the distributor for them and that the distributor used reasonable
collection practices in attempting to collect the debt.
(c) If credit is given to a distributor for a bad debt, the person who ordered
and received the tobacco products but did not pay the distributor for
them shall be liable in an amount equal to the credit for the tax imposed
in this article on the tobacco products. Subsequent to receiving the credit,
if the distributor receives a payment for the bad debt and the distributor
makes a payment to the department, the amount of taxes owed by such person
shall be reduced by the amount paid to the department.
(d) As used in this subsection (2), "bad debt" means the taxes attributable
to any portion of a debt that is related to a sale of tobacco products
subject to tax under this article, that is not otherwise deductible or
excludable, that has become worthless or uncollectible in the time after
the tax has been paid pursuant to
section 39-28.5-106, and that is eligible to be claimed as a deduction pursuant to section
166 of the federal "Internal Revenue Code of 1986", as amended.
A bad debt shall not include any interest on the wholesale price of tobacco
products, uncollectible amounts on property that remain in the possession
of the distributor until the full purchase price is paid, expenses incurred
in attempting to collect any account receivable or any portion of the
debt recovered, an account receivable that has been sold to a third party
for collection, or repossessed property.