In the last post, I discussed that in the State of NY, you must report/remit sales tax on an accrual basis, i.e., as of the date of the transaction, whether or not you actually collected on that transaction.
So what happens if you NEVER wind up receiving payment for a particular sale, but you submitted sales tax for that sale to the state? The good news…you can apply for a credit or refund for the amount remitted on a previous sales tax return.
Keep in mind…in order to receive a credit or refund, you will need to write off the uncollected invoice as bad debt on your federal return AND do not have any expectation to collect the debt in the future (not sent to a collection agency, etc...). You would file NYS Form AU-11, and submit it with copies of the original invoices as well as a copy of your federal return showing the debt was written off at the federal level. You should explain the situation on the AU-11 or attach an explanation.
Disclaimer: The information provided herein is not intended to provide or be a substitute for specific accounting, tax, or legal advice. Where specific advice is necessary or appropriate, I recommend consulting with a qualified tax advisor, CPA, or attorney. The information presented is obtained from what are considered reliable sources; however, its accuracy, completeness or reliability cannot be guaranteed and therefore should not be relied upon as such. Neither the author nor publisher shall be liable for any direct or consequential loss arising from any use of this information.
