{"data":{"id":"us-ky/krs-139.350","jurisdiction":"us-ky","citation":"KRS 139.350","heading":"Exception in the case of bad debts.","body":"(1) A retailer may deduct as a bad debt the amount found to be worthless and charged\noff for income tax purposes provided the retailer is reporting and remitting the tax\non the accrual basis. The retailer may take the deduction on the return for the period\nduring which the bad debt is written off as uncollectable in the retailer's books and\nrecords and is eligible to be charged off for income tax purposes. For purposes of\nthis section, \"charged off for income tax purposes\" includes the charging off of\nunpaid ba lances due on accounts determined to be uncollectable, or declaring as\nuncollectable the unpaid balance due on accounts if a retailer is not required to file\nfederal income tax returns.\n(2) In determining the basis for calculating bad debt recovery, the de finition of \"bad\ndebt\" as provided in 26 U.S.C. sec. 166 shall be used, except \"bad debt\" shall not\ninclude financing charges or interest, sales or use taxes charged on the purchase\nprice, uncollectable amounts on property that remains in the possession of  the\nretailer until the full purchase price is paid, expenses incurred in attempting to\ncollect any debt, or repossessed property.\n(3) Notwithstanding KRS 131.183, any deduction taken for bad debts shall not include\ninterest.\n(4) A retailer may obtain a re fund of tax on the amount of bad debt that exceeds the\namount of taxable sales for the period during which the bad debt is written off.\nNotwithstanding KRS 131.183, the refund claim must be made within four (4) years\nfrom the due date of the return on which the bad debt could first be claimed.\n(5) If any bad debt accounts are thereafter in whole or in part collected by the retailer,\nthe amount collected shall be included in the return filed for the period in which the\ncollection is made and the amount of the tax due shall be paid with the return.\n(6) If a retailer's filing responsibilities have been assumed by a certified service\nprovider as provided by KRS 139.795, the certified service provider may claim, on\nbehalf of the retailer, any bad debt allowance p rovided by this section. The certified\nservice provider shall credit or refund the full amount of any bad debt allowance or\nrefund received to the retailer.\n(7) For purposes of computing a bad debt deduction or reporting a payment received on\na previously claimed bad debt, any payments made on a debt or account shall be\napplied first to the price of the property or service and the sales tax on it,\nproportionally, and secondly to interest, service charges, and any other charges.","path":["KRS Chapter 139"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=28877","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:50:31Z","sha256":"63ff05db6525fd7f1907b501e79b5d58f3017094b1a94d75bb23693d56dabde9","source_id":"us-ky","stale":false,"prev":"us-ky/krs-139.340","next":"us-ky/krs-139.360"},"notice":"GroundRules: Original legal text. Not legal advice."}