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Indiana Supreme Court Denies Review of SAC Case

Posted 7:21 PM by

On Dec. 24, 2014, the Indiana Tax Court issued its long-awaited decision in SAC Finance vs. Indiana Department of State Revenue, a case that centered on the calculation of the allowable bad debt deduction afforded to the financing arm in a buy here-pay here structure. In SAC, the finance company purchased paper from a related retailer on a non-recourse basis at a discount. The central issue in the case was whether the finance company could calculate its allowable bad debt deduction using the Market Discount Rules.

The Indiana Tax Court held that the finance company was entitled to use the Market Discount Rules and the Indiana Department of Revenue (IDR) was incorrect in disallowing refunds calculated on this basis – reversing course on the IDR’s long-standing position that the sales tax, bad debt deduction calculation excluded market discount income. 

The IDR petitioned the Indiana Supreme Court for review of this case, and the petition was denied June 4, 2015.

We expect the IDR to issue guidance for taxpayers, both on past and future refund claims, in response to the denial and its indirect affirmation of the sales tax treatment as outlined by the Indiana Tax Court. An update will be provided outlining IDR’s response.

About the Author
Donna Niesen is a partner in Katz, Sapper & Miller’s State and Local Tax Group. Donna provides a wide variety of tax consulting services in the areas of multistate sales and income taxes, business incentives, controversy services, and other state taxes. Connect with her on LinkedIn.

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