California Sales Tax for Veterinarians - Bad Debt Deduction

If you reported tax on a sale and have been unable to collect payment from your customer, you may claim a deduction for the bad debt.


Bad debts may take the form of:

Checks returned unpaid by the purchaser’s bank which you have determined to be uncollectible, or

Accounts from charge or credit sales found worthless.

You must charge off the bad debts for income tax purposes or charge them off in accordance with generally accepted accounting principles.

You should claim the deduction on the return filed for the period in which you found the account worthless and wrote it off.

Your deduction cannot include the amount of tax applied to the sale, or any other nontaxable charges included in your total loss.

When you calculate your deduction, make sure to deduct tax from the total loss at the rate in effect when the sale was made.

You cannot deduct amounts you paid to collect the funds due.

If you later collect the money due for a bad debt (including worthless checks), any amount you previously claimed as a deduction must be reported as a taxable sale.


Source: California Department of Tax & Fee Administration (CDTFA)

Course: https://salestaxsolutions2000.com/california-sales-tax-veterinarians

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