                                 CODE OF VIRGINIA

BAD DEBT; DEDUCTION; DEFINITION (§ 58.1-1003.1)

A. Any stamping agent may deduct the amount of bad debts from the tax imposed by
this chapter. The amount deducted shall be charged off as uncollectible on the
books of the stamping agent. If a person pays all or part of a bad debt that a
stamping agent claimed as a deduction under this section, the stamping agent
shall be liable for the amount of taxes deducted in connection with that portion
of the debt for which payment is received and shall remit these taxes together
with its next report to the Department pursuant to subsection C of &#xA7;
58.1-1003.

B. Any claim for a bad debt deduction under this section shall be supported by
all of the following:

   1. A copy of the original invoice;

   2. Evidence that the cigarettes described in the invoice were delivered to the
   person who ordered them; and

   3. Evidence that the person who ordered and received the cigarettes did not
   pay the stamping agent for the cigarettes and that the stamping agent used
   reasonable collection practices in attempting to collect the debt.

C. As used in this section, &#8220;bad debt&#8221; means the taxes under this
chapter attributable to any portion of a debt that is related to a sale of
cigarettes subject to tax under this chapter that is not otherwise deductible or
excludable, that has become worthless or uncollectible in the time period
between the date when taxes accrue to the Department for the stamping
agents&#8217; preceding tax return and the date when taxes accrue to the
Department for the present return, and that is eligible to be claimed, or could
be eligible to be claimed if the stamping agent kept accounts on an accrual
basis, as a deduction pursuant to &#xA7; 166 of the Internal Revenue Code. A bad
debt shall not include (i) any interest on the wholesale price of cigarettes,
(ii) uncollectible amounts on property that remains in the possession of the
stamping agent until the full purchase price is paid, (iii) expenses incurred in
attempting to collect any account receivable or any portion of the debt
recovered, (iv) any accounts receivable that have been sold to a third party for
collection, and (v) repossessed property.

HISTORY: 2006, cc. 64, 229.