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How to Set up Location for Trade In Tax Credits

Goal

Some States allow a Trade in Tax Credit to affect the Taxable Liability of a Purchase price. This Guide will show you how to update the Location record to align with your States Guidelines.

Learn how to set up your Location to utilize the Trade-In Tax Credit. 

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 then scroll down to Taxation Settings. Note this will be unique for each Location that you set up. 

TradeIn tax credit, Location.png

 

There are 4 fields that will affect the Trade-In Tax,

Checkbox the fields you'd like to apply Trade-In Tax Credit and apply Max Trade Tax Amount.

  1. Include Trade-In in Deal Push
  2. Tax Trade-In New: This will apply the tax credit to any Sale where the Chassis Type is New.
  3. Tax Trade-In Used: This will apply the tax credit to any Sale where the Chassis Type is Used.
  4. 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.

 

Trade-In Examples

New and used tax credits both works in the same way and you can turn them both on if you have a tax credit that applies to all car purchases. Ensure Tax Trade-In New and Tax Trade-In Used checkboxes are checked.

So let's go through a few Deals to see how this will work:

 

Tax Trade-In New

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:

tradein2.png

 

Tax Trade-In Used

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 Trade 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.
 

Max Trade-In Credit Amount

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. In this case, we set the Max Trade-In Credit to $10,000.00. Let's 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 is appraised for $12,000.00 So in this case, the Trade-In amount will show as $12,000.00 but the tax credit will only apply to the first $10,000.00 of Trade-In value:

tradein10.png