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 section 39-28.5-106.
(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.