- California’s budget legislation, SB 167, limits and suspends the sales and use tax bad debt deduction.
- The legislation changes the retailer definition for the bad debt deduction, including entities affiliated with the retailer, until January 1, 2025.
- Starting from January 1, 2025, retailers cannot claim a bad debt deduction, although the disallowance expires on January 1, 2028. Affiliated entities are not eligible for the reinstated bad debt deduction. Existing and future claims for accounts charged-off up to December 31, 2024, are still eligible for the deduction.
Source PwC
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