Bill > HB5250

This bill establishes a process for sellers and lenders to receive sales tax refunds when a retail installment transaction for a passenger car becomes a bad debt. Specifically, the bill defines "bad debt" as an unpaid balance of a retail installment account that has been charged off for federal income tax purposes, and allows the seller or lender who originally paid sales tax on the vehicle to claim a refund from the comptroller. To qualify for the refund, the account must be determined to be worthless and written off as a bad debt. The refund amount will be calculated by allocating the bad debt between taxable and nontaxable charges proportionally and then multiplying the taxable portion by the applicable tax rate. If the seller assigns the contract to a lender, the lender can also file for the refund, but the seller cannot receive a refund for the same bad debt. Additionally, if the seller or lender later collects any portion of the bad debt, they must deduct that amount from future refund claims. The bill requires detailed documentation to be maintained and made available to the comptroller to verify the refund claim, and explicitly does not apply to seller-financed sales. The changes will take effect on September 1, 2025, and do not retroactively affect tax liabilities accrued before that date.

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https://capitol.texas.gov/BillLookup/History.aspx?LegSess=89R&Bill=HB5250