House Bill No. 5250 introduces a new section, Section 152.049, to the Texas Tax Code, which establishes a process for sellers and lenders to claim refunds for motor vehicle sales taxes paid on certain bad debts. The bill defines "bad debt" as the unpaid balance of an account related to a retail installment transaction that has been charged off for federal income tax purposes. It allows sellers who collect sales tax on passenger cars sold in retail installment transactions to file claims for refunds if the associated accounts are deemed worthless and written off. Lenders who hold retail installment contracts may also claim refunds under specific conditions, ensuring that the seller has not already received a refund for the same bad debt.

The bill outlines the calculation for the refund amount, which involves allocating the bad debt between taxable and nontaxable charges and applying the appropriate tax rate. It also mandates that sellers and lenders maintain detailed records to support their claims and specifies that the section does not apply to seller-financed sales. The changes made by this Act will not affect tax liabilities that accrued before its effective date of September 1, 2025, allowing for the continued enforcement of prior tax laws.

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