11/30/2001

Clarification of Sales Tax Charges Regarding Trade-Ins or Exchanges-Part 2

Q & A Section put together by the tax division.

CLARIFICATION OF SALES TAX CHARGES REGARDING
TRADE-INS OR EXCHANGES

QUESTION 1:

A customer who pays tax on everything bought from the parts supplier, buys an engine which required a Trade-in of the same type as delivered:

Is this the correct procedure, when old motor is turned in at time of transaction:
MOTOR$350.00
TAX 21.00
$371.00
LESS TRADE-IN -75.00
BALANCE$296.00

ANSWER: YES

QUESTION 2:

Would exchanges of brake shoes, batteries, carburetors, starters, alternators, generators, tires or any other item be invoiced and taxable as in above?

ANSWER: YES

NOTE: You can bill merchandise out at the Exchange price but they must include the tax on value of old cores.

QUESTION 3:

Because the customer does not bring in old starter (or other exchange item) when the rebuilt one is delivered, parts supplier charges a deposit to insure its return. Should sales tax be charged and credited as described below?

ORIGINAL SALE: REBUILT STARTER $130.00
DEPOSIT 50.00
$180.00
6% SALES TAX 10.80
BALANCE $190.80

ANSWER: THE CHARGE IS CORRECT

QUESTION 3-A:

In above transaction, customer later returned old starter (or other exchange item) and was credited:
STARTER DEPOSIT $50.00
SALES TAX 3.00
$53.00
In above transaction is it permissible to refund or credit the tax on the deposit?

ANSWER: NO

QUESTION 4:

A parts supplier sells new parts which require a deposit be charged. Sales tax is charged on all items in the transaction--including tax on the deposit. The customer later returns the merchandise, un-used and in salable condition. Wholesaler refunds all the money paid him originally, including tax charged on the items requiring a deposit. Is this the correct procedure?

ANSWER: YES