Sales, Use and International Tax Activity Update - August 2010

Massachusetts — Advice Abounds for Bounced Checks

A Massachusetts Department of Revenue Directive provides guidance on sales and use tax deductions on purchases made with checks that are dishonored by the purchaser’s bank (NSF checks).

If a vendor learns that a check has been dishonored prior to filing the return for that period, the vendor may deduct the amount of the NSF check as an "other adjustment" on line 2 of the return. If the return for the period has already been filed when the vendor learns the check has been dishonored, the vendor should include the amount of the NSF check in its bad debt claim for the fiscal year.

In either situation, if the vendor later recovers on the NSF check from the purchaser or a third party, the vendor must include the recovered amount in its gross receipts for that later period.

Directive 10-3, Massachusetts Department of Revenue, July 7, 2010.

The Directive 10-3 can be viewed on the Massachusetts Department of Revenue Web site.

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