NC Business Court Affirms Final Agency Decision - Home Depot, U.S.A. Inc. v. Department

On November 6, 2015, the North Carolina Business Court ("Court") issued the Order on Petition for Review of Final Decision ("Order") affirming the Agency's Final Decision in Home Depot U.S.A., Inc. v. North Carolina Department of Revenue, Wake County Superior Court File No. 11 CVS 2261.  In the Order, the Court upheld the Department's interpretation of N.C. Gen. Stat. §105-164.13(15), a statutory provision contained in the North Carolina Sales Tax Act authorizing a deduction for worthless accounts ("Worthless Account Deduction").  Specifically, the Court concluded that a retailer seeking to claim the Worthless Account Deduction must: (1) be the holder of account that generates the debt and (2) charge off the debt on its income-tax returns.  Based on these conclusions, the Court rejected Home Depot's contention that it was entitled to claim the Worthless Account Deduction for worthless accounts associated with private label credit cards ("PLCC") as Home Depot neither owned the worthless PLCC accounts nor charged off such accounts on its income-tax returns.  The Court further rejected Home Depot’s arguments that the Department’s interpretation of the Bad Debt Statute violated the Equal Protection and Due Process Clauses of the United States and North Carolina Constitutions.