Ezel / Tax Rulings / CA

Could a retailer deduct bad debts after assigning its receivables?

Short answer Yes, when the assignment left the retailer bearing the bad-debt loss from its own sales, as though it had retained the receivables.
State
CA
Ruling
Annotation 130.0080
Tax type
Sales and Use Tax
Issued
1967-03-03
Issued by
California State Board of Equalization
Requested by
A party proposing revised terms for a retailer's assignment of accounts receivable
Topics
accounts receivable assignment recourse bad debts credit sales
Source
View Original PDF

Apply this to your situation

This page answers the general question as of 1967. Ask about yours and see what current California tax law says, with citations.

Currency note: this ruling is from 1967
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is a March 3, 1967 California State Board of Equalization tax-counsel letter approving a proposal that addressed prior objections to bad-debt claims on receivables sold without recourse. The official source does not reproduce the February 24 proposal, so this page states only the grounded conclusion that the retailer would bear losses from its own sales. Current assignment, recourse, receivable, bad-debt, and sales-tax rules may differ. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

The revised proposal placed the bad-debt loss from the retailer's own credit sales back on the retailer, resolving the Board's objection to deductions after a no-recourse receivables sale.

Because the retailer would bear the loss, it could claim bad-debt deductions to the same extent allowed if it had never assigned the accounts.

Citations and references

  • The February 24, 1967 receivables proposal (described but not reproduced in the source)

Source

Original ruling text

130.0080

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

March 3, 1967

Dear Mr. [X]:

Bill Denny has asked me to inform you in regard to the proposal set forth in “B”’s letter to you dated February 24, 1967. This relates to the matter recently discussed in Mr. Denny’s office relative to bad debts. The proposal, as expressed in “B”’s letter, satisfactorily meets the objections we had to the claiming of bad-debt deductions with respect to accounts which had been sold by the retailer without recourse. It appears under the proposal that the retailer will bear the bad-debt loss arising from his own sales and will then be in a position to claim such losses as bad-debt deductions to the extent permissible when there is no sale of accounts receivable. Very truly yours,

E. H. Stetson
Tax Counsel
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