Trade-in Tax Credits
In some tax jurisdictions the amount of Sales Tax owed on a vehicle Purchase is affected by the Value placed on the Trade In made on a Deal. This can vary by Location and in the amount of credit that can be offered. This Article will explain how to update the Location Record to enact Different Rules for Trade in Tax Credits.
Before we dig in we should explain how a Trade in Tax Credit works, If You trade in a vehicle towards the purchase of another vehicle, the value of your trade in Lowers the taxable liability of the vehicle that you are purchasing. So let's say that you have a trade in worth $5000.00 and you are purchasing a vehicle for $30,000.00. If a Trade in tax credit applies you would only owe tax for $25,000.00. The if it applies to my Dealership and when should it be applied should be answered by your Title and accounting department. It will vary from State to State. To begin navigate to the Location record, Note this will be unique for each Location that you set up.
There are Three Boxes there that will Affect the Trade in Tax:
- Tax Trade in New : This will apply the tax credit to any Sale where the Chassis Type is New.
- Tax Trade in Used : This will apply the tax credit to any Sale where the Chassis Type is Used.
- Max Trade Tax Amount : If there is a maximum trade in Tax Credit you can apply it here and the combined value of New and Used will not exceed this amount.
Let's go through a few Deals to see how this will work:
In this Deal Brian Tucker is purchasing a new Chevy Silverado, If at the location we only have the Tax Trade In New Box Checked this would apply. The Truck is Selling for $47,090.00 and he is trading in his 2001 Dodge Ram 1500 that is Worth $4,500.00. In this case the Trade in would affect the taxable Amount like this:
Under the Same Rule Set if Brian was looking at a Used Vehicle The Tax credit will not apply and the line on the invoice for Tax credit will not be populated on any of our Forms. The thing to keep in mind is this trigger will only apply to the Record Type on the Vehicle Inventory Record. If you do not have that information correct the tax credit will not calculate correctly. New and used both work in the same way and you can turn them both on if you have a tax credit that applies to all car purchases.
The Last variable to consider is the Max Trade in Credit. In some taxable Jurisdictions there is a maximum amount of credit that you can take for a trade in. For this case we set the Max Trade in Credit to $10,000.00. Lets go back to Brian's Deal and see what it looks like now. Instead of trading in his 2001 Dodge, He has decided to Trade in his 2012 Toyota Rav 4, The Rav 4 appraised for $12,000.00 So in this case
***********Found Bug on Max Trade, Need to address before finalizing article****************