On December 27, 2022, Ohio Governor Mike DeWine signed HB 223 into law, expanding the ability of vendors to deduct sales tax for bad debts. The bill impacts businesses, such as retail stores, that offer store-branded credit cards and applies to debt charged off as uncollectible on or after July 1, 2023.
Previous to HB 223, a vendor that generated bad debt could claim it as such for tax purposes, but the vendor who ultimately would not receive payment in the transaction still had to pay sales tax on the purchase with no opportunity for a refund from the state. Below outlines how HB 223 works:
A win for retailers, vendors will want to act now to communicate with third-party accounts and potentially delay write offs until July 1 to maximize the new debt write-off rules.
Contact Nick Longo at nlongo@cohencpa.com, Mike Fink at mfink@cohencpa.com or a member of your service team to discuss this topic further.
Cohen & Co is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.