Trade-In And Trade-Down

Sections 63-3612, 63-3613, 63-3621, Idaho Code 01. Trade-In. A trade-in is the amount allowed by a retailer on merchandise accepted as payment for other merchandise. Merchandise is tangible personal property which is, or becomes, part of an inventory held for resale. (7-1-26) IDAHO ADMINISTRATIVE CODE IDAPA 35.01.02 State Tax Commission Idaho Sales & Use Tax Administrative Rules Section 045 Page 22 02. Trade-Down. A trade-down is a transaction in which a vendor accepts a trade-in from the customer that equals or exceeds the value of the merchandise sold to the customer. The taxable sales price is reduced to zero (0) and no sales tax is due on the transaction. (7-1-26) 03. Trade Allowance. When a retailer sells merchandise from their resale inventory and lets the customer trade other goods which the retailer places in their resale inventory, the taxable sales price of the merchandise may be reduced by the amount allowed as trade. A trade allowance will qualify if the property traded meets the following criteria: (7-1-26) a. The property is consideration delivered by the buyer to the seller; (3-31-22) b. The sales documents, executed not later than the time of sale, identify both the property being purchased and the property being traded; and (7-1-26) c. The delivery of the trade and the purchase are components of a single transaction. (7-1-26) d. The buyer is an owner of the property being traded. (7-1-26) 04. Disallowed Trade Allowance. (7-1-26) a. Private Party Transactions. A trade allowance isn’t allowed on transactions between individuals because the traded property doesn’t become a part of an inventory held for resale. (7-1-26) b. Insurance Settlements. An insurance settlement doesn’t qualify as a trade allowance. (7-1-26) 05. Core Charges. Parts for cars, trucks, and other types of equipment are often sold with an added core charge. When the used core is returned, the core charge is refunded. This is essentially a trade-in of a used part for a new part. Since the seller cannot be certain that the customer will return a reusable core, such core charges are taxable. The tax on the core charge will be refunded by the seller at the time credit for the core charge is allowed. (3-31-22) 06. Trade-In for Rental/Lease Property. When tangible personal property is traded in as partial payment for the rental or lease of other tangible personal property, sales tax applies to all payments made after the value of the trade-in property has been depleted and the lessor begins charging for the lease or rental. The methods of applying the trade-in value to the lease are: (7-1-26) a. The trade-in value may be subtracted from the value of the leased or rented property, thereby reducing the monthly payments and the sales tax due on those payments. (3-31-22) b. The trade-in value may be subtracted from the initial lease payments, with no sales tax due on those payments until it is used up. (3-31-22) c. A combination of the two (2) methods, above. (3-31-22) 07. Rental/Lease Property Traded-In. When a person disposes of tangible personal property that is leased and assigns his right to purchase the leased property to the retailer, no trade-in allowance is given for the amount of the residual buyout paid by the retailer. However, if the residual buyout amount which the lessee would pay to purchase the property is less than the amount that would be allowed by the retailer as a trade-in if the lessee had actually owned the vehicle, then the taxable sales price may be reduced by the difference between the total trade- in amount and residual buyout. (3-31-22) 08. Examples. Available at Sales and Use Tax Examples. (7-1-26)