AZ HB2339

Allows retailers to deduct bad debts from gross proceeds of sales or gross income in the retail transaction privilege tax (TPT) classification, subject to specific conditions including that the debt arose from a valid debtor-creditor relationship and is uncollectible.

For bad debts from private label credit cards, limits deductions in phases: 25% July 1, 2018-June 30, 2019; 50% July 1, 2019-June 30, 2020; 75% July 1, 2020-June 29, 2021; and 100% from June 30, 2021 onward, with amounts exceeding limits permanently disallowed.

Requires retailers and private label lenders to maintain adequate documentation supporting charged-off debts and use an apportionment or specified percentage method to allocate bad debt deductions to specific taxing jurisdictions.

Extends bad debt deduction provisions to use tax under section 42-5159 and requires cities and towns that levy retail TPT to allow the same bad debt deductions.

Effective September 30, 2017 for section 42-5061 amendments and June 30, 2018 for section 42-5159 amendments and new section 42-6014.