If you accept trade-ins or require the exchange of a used item or core when making sales, you must charge tax on both the cash paid and the value of the trade-in or exchange.
For example, if you sell a starter for $54 in cash and collect $10 as security for a trade-in of an old starter, you must collect tax on $64, the cash price of the new starter plus the value of the anticipated trade-in. When the customer turns in the old starter, you do not refund the tax on the $10, which you refund to the customer.
Selected re-manufactured parts exempt
The tax does not apply to core charges made in connection with sales of these re-manufactured truck parts and their components:
- Air brake systems
- Rear axle carriers