Section Tax 4.12 - Uncollected motor vehicle fuel taxes and repossessions(1) PURPOSE. This section clarifies when and how a supplier required to be licensed by the department may recover the motor vehicle fuel tax from the department when a purchaser is unable to pay the tax to the supplier. This section also clarifies when and how a wholesaler distributor may recover the motor vehicle fuel tax from the department when the wholesaler distributor is unable to collect the tax from another wholesaler distributor or a retail dealer.(2) STATUTES. Under s. 78.01(2s), Stats., a supplier is not liable for the tax on motor vehicle fuel when the supplier is unable to recover the tax from a purchaser. With proper documentation, the supplier may claim a tax deduction on a later remittance of taxes. A wholesaler distributor may file a refund claim with the department to recover the tax on uncollectable accounts covering sales to other wholesaler distributors and retail dealers.(3) PROCEDURE. (a)Tax imposed. A supplier shall pay the motor vehicle fuel tax to the department by the 15th day of the month after the month in which the fuel is received, as described in s. 78.07, Stats., irrespective of whether the sale is for cash or credit.(b)Bad debts.1. `Deduction from measure of tax.' A supplier is relieved from the liability for motor vehicle fuel tax on accounts which have become worthless and which have met the requirements to be charged off for income or franchise tax purposes. The bad debt tax deduction shall be reported and claimed on the supplier's monthly tax report for the month in which the account becomes worthless. However, if a supplier is out of business when the account becomes worthless, a bad debt deduction may be claimed on the last return filed by that business or through a refund claim filed with the department. A wholesaler distributor may claim a bad debt tax deduction for the amount of tax liability for motor vehicle fuel tax on sales to other wholesaler distributors or retail dealers on accounts which have become worthless and which have met the requirements to be charged off for income or franchise tax purposes by filing a refund claim with the department. A claim for refund relating to a worthless account must be filed within 4 years of the 15th day of the 4th month following the close of the supplier's or wholesaler distributor's calendar or fiscal year within which the account becomes worthless. Examples:
1) An account of a supplier who is still in business becomes worthless and meets the requirements to be charged off for income or franchise tax purposes on January 10, 2011. The supplier may claim a bad debt deduction on the motor vehicle fuel tax return, form MF-002, filed for the month of January 2011, even though the bad debt deduction may not be claimed for income or franchise tax purposes until the 2011 income or franchise tax return is filed in 2012.2) Assume the same facts as in Example 1, except the account is that of a wholesaler distributor. Irrespective of when the wholesaler distributor files the income or franchise tax return on which the bad debt deduction is claimed, the wholesaler distributor may file a claim for refund to recover the uncollected motor vehicle fuel tax any time between January 10, 2011 and April 15, 2016. 2. `Recovery of bad debts charged off.' If a bad debt deduction has been claimed by a supplier or wholesaler distributor for an account found worthless and charged off and the account is thereafter in whole or in part collected by the supplier or wholesaler distributor, the bad debt deduction shall be repaid to the department. A supplier shall report the amount so collected in the first tax report, form MF-002, filed after the collection, and the tax on the amount collected shall be paid with the report. A wholesaler distributor shall file a corrected refund claim and pay the tax collected within 30 days of collection.3. `Amount deductible.' a. A deduction may only be claimed for the unpaid amount of tax on an account found worthless and charged off. The total amount charged off may include the cost of the fuel, interest, financing or insurance costs in addition to the tax amount. To determine the unpaid amount of tax to be deducted, all payments and credits to the account shall be prorated to the various components of the total amount that the purchaser contracted to pay. Example: At the time when the tax rate is 30.9¢ per gallon, Supplier A sells 8,000 gallons of gasoline to Company B. Company B has an agreement with Supplier A to delay payment of the tax. The amount of the contract is $12,942, consisting of tax, $2,472, and the cost of fuel, $10,470. Company B defaults and discontinues operations, leaving a balance due Supplier A of $2,100, which includes interest of $200 not included in the contract amount. The deductible tax loss is $363, computed as follows:
Contract amount | $12,942 |
Unpaid contract amount | -1,900 |
Paid contract amount | $11,042 |
Portion constituting tax* | x.191 |
Tax paid | $2,109 |
b. No deduction may be allowed for expenses incurred by a supplier or wholesaler distributor in attempting to collect any account receivable, or for that portion of a debt recovered that is reclaimed by or paid to a third party as compensation for services rendered in collecting the account.4. `Special situations.' A purchaser of receivables may not claim a bad debt deduction for the motor vehicle fuel tax on receivables that subsequently become worthless.5. `Repossessions.' When motor vehicle fuel is repossessed a tax deduction may be allowed only to the extent that the supplier or wholesaler distributor sustains a net loss upon which tax was paid.(c)Tax rate change. If a deduction for uncollectible tax is claimed in a period when the tax rate is different from the tax rate in effect when the tax was reported on the tax report, an adjustment to the gallons claimed shall be made to compensate for the tax rate differential. The number of gallons to claim is computed by dividing the old tax rate by the new tax rate and multiplying that percentage by the gallons sold. Example: If tax was reported on an 8,000 gallon sale when the tax rate was 23.2¢ per gallon and a deduction was taken at a 24¢ rate, only 7,733 gallons may be claimed on the monthly supplier's tax report; [23.2 24] x 8,000 = 7,733.
Wis. Admin. Code Department of Revenue Tax 4.12
Emerg. cr. 4-1-94; cr. Register, November, 1994, No. 467, eff. 12-1-94. This section interprets ss. 78.01(1) and (2s) and 78.68(10), Stats.