Florida DOR Seeks Dismissal of Sales Tax Bad Debt Refund Lawsuit

Florida DOR Seeks Dismissal of Sales Tax Bad Debt Refund Lawsuit

Overview

The Florida Department of Revenue has filed a Motion to Dismiss in a lawsuit seeking sales tax refunds related to bad debts, arguing that a private-label credit card issuer lacks standing under chapter 212. 

The Leon County Circuit Court places renewed attention on a recurring Florida sales tax issue: who has standing to recover sales tax paid on bad debts. The case arises from refund claims filed by a private-label credit card issuer seeking recovery of sales tax associated with consumer accounts written off as uncollectible. The Florida Department of Revenue denied the refund claims and responded to the lawsuit with a Motion to Dismiss, arguing that the plaintiff lacks statutory standing and failed to state a claim under Florida’s sales tax refund statutes.

Factual Background

Retailers collected and remitted Florida sales tax on consumer purchases financed through private-label credit cards. After consumer defaults, the lender sought refunds for sales tax tied to bad debts.

According to the Complaint, the plaintiff is a financial institution that issues private-label credit cards used by consumers to purchase taxable tangible personal property from Florida retailers. The retailers collected Florida sales tax at the point of sale and remitted the tax to the Department.

When certain consumers defaulted, the bank wrote off the accounts as bad debts for federal income tax purposes. The bank then sought a refund of the sales tax attributable to those bad debts, asserting refund entitlement either as a lender under section 212.17, Florida Statutes, or as an assignee of the retailers’ refund rights

Legal Framework

Florida sales tax refunds are governed by section 212.17, Florida Statutes, which strictly limits refund eligibility to dealers that collected and remitted the tax.

Refund statutes are strictly construed under Florida law. Courts consistently hold that only the party that bore the legal obligation to collect and remit the tax may qualify for a refund, absent express statutory authorization.

Department’s Position

The Department argues that lenders are not dealers, sales tax liability arises at the time of sale, and refund rights cannot be created through assignment agreements.

Specifically, in its Motion to Dismiss, the Department has argued:

• The plaintiff is not a “dealer” under chapter 212
  • Sales tax is due at the time of sale, regardless of later nonpayment
  • Section 212.17 does not authorize lenders to claim bad debt refunds
  • Assignment agreements cannot create statutory refund rights
  • Florida courts have repeatedly rejected lender-standing theories
  
  

The Department maintains that allowing refund claims by financing institutions would expand refund eligibility beyond what the Legislature authorized

Conclusion

The case reinforces Florida’s narrow interpretation of sales tax refund standing and may limit bad debt recovery strategies involving financing institutions.

If granted, the motion would reaffirm Florida’s restrictive approach to sales tax bad debt refunds. Retailers and lenders operating in Florida should carefully assess:

• Who is the statutory taxpayer
  • Whether refund rights exist at the time of sale
  • The limits of assignment-based recovery strategies
  
  

The case remains pending and could further solidify Florida’s position among states that deny lender-based sales tax bad debt recovery.

Authorities

Sections 212.02, 212.06, 212.17, and 215.26, Florida Statutes;

Florida Rules of Civil Procedure;

Complaint and Motion to Dismiss filings in Comenity Capital Bank vs. Florida Department of Revenue.

© 2025 Jeanette Moffa. All rights reserved.