Background on the Dispute

A Leon County Circuit Court has dismissed two consolidated lawsuits brought by Comenity Capital Bank and Comenity Bank against the Florida Department of Revenue, providing an important reminder that Florida’s tax refund statutes impose strict procedural and jurisdictional requirements before a refund action may proceed.

At the center of the dispute was a common retail financing arrangement. Comenity issues private label credit cards for numerous retailers. When a customer purchases taxable goods using one of those cards, the retailer receives payment, remits the applicable Florida sales tax to the Department of Revenue, and the customer repays the bank over time.

The dispute arose after certain customers defaulted on their credit card obligations. Comenity wrote those accounts off as bad debts under Section 166 of the Internal Revenue Code and sought Florida sales tax refunds, arguing that agreements with participating retailers transferred the retailers’ refund rights to the banks. The refund claims totaled more than one million dollars across the two cases, plus interest, under sections 72.011, 212.17, and 215.26, Florida Statutes.

The Department denied the refund requests, and the banks sought judicial review in Leon County Circuit Court.

The Court Focused on Jurisdiction Before the Merits

Rather than analyzing whether the banks qualified for a bad debt refund under Section 212.17, the court first examined whether it had authority to hear the lawsuits at all.

The court concluded that it did not.

According to the order, Chapter 72 establishes mandatory jurisdictional prerequisites for tax refund litigation. Section 72.011(5), Florida Statutes, provides that compliance with those statutory requirements is jurisdictional. As a result, failing to satisfy even one prerequisite prevents a court from considering the underlying refund claim.

The court focused specifically on Section 72.011(1)(b), which requires a taxpayer challenging a refund denial to comply with the registration requirements applicable to the tax being contested. For Florida sales and use tax, those requirements are found in Section 212.18.

Because Comenity acknowledged that it was not a registered dealer, the court concluded the banks could not satisfy this threshold requirement. In the court’s view, an entity that is not eligible to register as a dealer likewise cannot invoke the circuit court’s jurisdiction for a sales tax refund action.

Standing Remained a Separate Barrier

The order also concluded that the banks lacked standing to pursue the refund claims.

Comenity argued that it stepped into the retailers’ shoes through contractual merchant agreements that assigned various transaction rights to the banks. Because the banks ultimately absorbed the financial loss after customer defaults, they argued they were entitled to pursue the associated sales tax refunds.

The court rejected that argument.

Relying on prior Florida appellate decisions, including Department of Revenue v. Daystar Farms, Inc. and Oracle America, Inc. v. Department of Revenue, the court concluded that standing in Florida tax refund litigation depends upon the party recognized by statute as the taxpayer authorized to pursue the claim.

The court further observed that Florida’s sales tax statutes place the legal incidence of the tax on the purchaser while requiring dealers to collect and remit the tax. According to the order, nothing in the statutory framework extended refund standing to third party lenders financing retail transactions.

Contract Assignments Did Not Change the Result

The banks also argued that their merchant agreements transferred any available refund rights from participating retailers.

The court found several problems with that position.

First, the court noted that the complaints did not include the complete agreements supporting the alleged assignments. Instead, the pleadings relied upon limited contractual language referring to transaction records and related rights.

Second, the court concluded that even if the agreements were considered, Florida law generally does not allow a party to assign a refund right that does not yet exist.

According to the order, the retailers had already been paid in full at the time of each sale and therefore possessed no accrued bad debt refund right capable of assignment. Because no refund right had vested when the contracts were executed, the court concluded there was nothing for the retailers to transfer.

Section 212.17 Remains Dealer Focused

A significant portion of the order analyzes Florida’s bad debt refund statute, Section 212.17.

The court repeatedly emphasized that the statute consistently refers to the dealer as the party authorized to claim a credit or refund for qualifying bad debts.

Although Section 212.17(4)(g) incorporates information maintained by lenders to calculate bad debt amounts, the court interpreted that provision as creating only an accounting mechanism. The lender’s records may establish the amount of the bad debt, but the statute does not authorize the lender itself to claim the refund.

The court also examined Section 212.17(4)(f), which permits certain affiliated entities to claim a bad debt credit on behalf of a dealer. Because Comenity had no ownership relationship with the retailers and did not file Florida sales tax returns on their behalf, the court concluded the affiliate provision did not apply.

Finally, the court noted that a dealer’s certificate of registration is not assignable under Section 212.18(3)(b), reinforcing its conclusion that contractual agreements alone cannot transform a lender into a qualifying dealer.

The Court Also Rejected the General Refund Statute

Comenity alternatively relied on Section 215.26, Florida’s general tax refund statute.

The court rejected that argument as well.

Citing Causeway Lumber Co., Inc. v. Lewis, the order concluded that Section 212.17 provides the exclusive statutory remedy for recovering sales tax associated with bad debts. By contrast, Section 215.26 applies to taxes that were paid in error, overpaid, or paid when no tax was due.

Because the original retail transactions were taxable at the time of sale, the court reasoned that later customer defaults could not transform valid tax payments into overpayments recoverable under Section 215.26.

The Cases Were Dismissed With Prejudice

The court ultimately granted the Department’s motions to dismiss both lawsuits with prejudice.

The order found that the banks lacked standing, failed to satisfy the jurisdictional requirements governing Florida tax refund actions, and failed to state a viable cause of action. The court further concluded that amendment would be legally futile and denied leave to amend before directing the clerk to close both cases.

Why This Decision Matters

Although this is a circuit court order rather than binding statewide precedent, the decision provides insight into how one Florida trial court interprets the relationship between Sections 72.011, 212.17, and 215.26.

For lenders participating in private label credit card programs, the order suggests that contractual assignments alone may not establish standing to pursue Florida sales tax refunds arising from bad debts.

For retailers, lenders, CPAs, and SALT practitioners, the decision also highlights the importance of dealer registration, statutory standing, and compliance with Chapter 72 before pursuing refund litigation.

Whether this interpretation is ultimately adopted by Florida’s appellate courts remains to be seen, but the order offers a detailed roadmap for how the Department of Revenue is likely to approach similar refund disputes going forward.