The Illinois Department of Finance said it has problems with how discounts are reported on some new tax returns from new car dealerships. Accountants at the Illinois Department of Revenue have found that certain discounts are either deducted from the total selling price of a vehicle or added to the exchange value before VAT is calculated. Several trade-in transactions: A buyer can use a trade-in credit when trading more than one vehicle to a dealership when purchasing a new or used vehicle. The dealer may use the cumulative trade-in credits of the exchanged vehicles to reduce gross revenue from the sale of the newly acquired vehicle as long as trade-ins and sales are counted as a single transaction. Valuation of exchanged vehicles: The sale price of a vehicle does not include value or credit for traded personal property if the negotiated object is of the same nature and character as the one sold. The value of a vehicle exchanged is the value assigned to the vehicle, regardless of the outstanding debts that a party owes to the dealer. and does not affect the buyer`s ability to apply the pre-negotiation credit to the purchase of one or more vehicles as long as the buyer is contractually required to purchase a vehicle from the dealer within the specified time frame. Upon closing the transaction, the purchaser may pay the dealer a cash payment or other consideration for the purchase price of a purchased vehicle or a purchased vehicle. The amount of credit for a vehicle exchanged is the value assigned to the vehicle, which is reduced by all cash payments received by the buyer or owner of the exchanged vehicle. The depreciation due to the compensation of cash payments gives rise to the actual credit of the vehicle exchanged. In the case of a cash payment to the buyer or owner of the negotiated vehicle, the balance of the trade-in corresponds to the actual balance of the vehicle. Splitting trading transactions: A buyer can use a trade-in credit when trading a single vehicle with a dealer when buying more than one new vehicle. The dealer can distribute the amount of the balance of the exchanged vehicle and apply it to the purchase price of one or more new vehicles as long as the exchange and purchases are counted as a single transaction.
The amount of the trade-in loan applicable to each new vehicle is set by the dealer and the buyer. No trade-in credit can be used in a transaction in which the sales or usage tax return does not reflect the fact that a trade was offered at the time of the sale transaction. The corresponding sales or use tax declaration cannot be changed to reflect the value or credit of a vehicle offered for trading after the sale process has closed.
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