Each member state allows sellers, and any other party it gives a bad debt deduction, to deduct bad debts from taxable sales, excluding interest. The amount follows the federal bad debt definition in 26 U.S.C. 166, adjusted to exclude financing charges and interest, sales or use tax charged, uncollectable amounts on property the seller keeps until paid in full, collection expenses and repossessed property. The deduction is taken on the return for the period in which the debt is written off as uncollectable in the books and is eligible for the federal deduction (or would be, for a claimant that files no federal return). Tax on any later recovery is reported in the period collected, with payments applied first proportionally to the taxable price and its tax and then to interest and other charges. Where bad debts exceed the period's taxable sales a refund may be claimed within the state's limitation period measured from the due date of the first return on which the debt could be claimed. A CSP that has taken over filing may claim the allowance for the seller and must pass the full amount on to it; allocation among member states is allowed where the books support it.
The graph holds this control, the 0 it maps to, and the evidence behind each claim, over MCP and REST.