The Colorado Court of Appeals held that sales tax bad debt credits may not be claimed by a financial company that issued private label credit cards. As a private label retail credit card issuer, Capital One financed purchases made by its cardholders. Under the terms of its agreements with retailers, Capital One financed purchases made with the retailers, including any sales tax. Colorado provides a bad debt credit to taxpayers for sales tax previously paid on defaulted financing transactions.  Capital One argued that it was a taxpayer for Colorado sales tax purposes because the definition of “taxpayer” includes “any group or combination” of persons “acting as a unit.” The Court held that Capital One and the retailers did not constitute a group or unit and therefore they are two distinct legal entities. Because the retailers were obligated to pay the sales tax to the Department, only the retailers were entitled to the credit (or refund).

Capital One, N.A., v. Colo. Dep’t Rev., 2022COA16 (Colo. Ct. App. Feb, 10, 2022).