Under current law, a bad debt deduction is available if a vendor makes a sale on credit, collects the sales tax due and then suffers a default by the purchaser. The debt must have remained uncollected for at least six months and are still uncollected during the most recent sales tax reporting period. A refund is available if the vendor’s bad debt exceeds taxable sales for the reporting period. This process is available for department stores and other retailers that issue private label credit cards and administer the credit cards in-house.
House Bill 112 and now its companion, Senate Bill 188, expand the deduction and refund allowance to private label credit cards administered by third parties (banks, lenders, etc.). These bills recognize the fact that in today’s commercial environment most credit cards issued in a retailer’s name are handled by third party lenders.
The Ohio Chamber lent its support to this effort with a letter submitted to both the House Financial Institutions Committee and the Senate Finance Committee. The Ohio Chamber believes these companion bills remove the inequity of the current statute that has resulted in a sales tax windfall to the state of Ohio. Additionally, this update of the outdated sales tax deduction process will create parity between retailers that continue to administer their private label credit cards and retailers that have chosen to turn the credit card administration over to third parties.
HB 112 received its second hearing in May but has seen no further activity since then. SB 188 was recently introduced and will receive its second hearing today. The Ohio Chamber will continue to follow these bills and urge the General Assembly to pass one of the companion bills and send it to the governor for signature.