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BTLG Table of Contents > Sales and Use Tax Annotations > B > 130.0000 Bad Debts > Annotation 130.0145

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B

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130.0000 Bad Debts—Regulation 1642

Annotation 130.0145

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130.0145 Default on "No Recourse" Paper. A retailer of sailboats sells to a bank chattel papers that the bank agrees to accept, without recourse. Although the bank establishes a Bankway Loss Reserve in the retailer's name and charges to the reserve any indebtedness or obligation of the taxpayer to the bank and any deficiency on any contract in default, the taxpayer is not entitled to any bad debt deduction for sales tax purposes on defaulted contracts because the paper was sold without recourse. The reserve functions as a kind of self-regulating discount provision and cannot be equated with a right of recourse. 11/3/72.