Effective December 15, 2013, the value of a motor vehicle or RV taken as a trade-in toward the purchase of a new or used motor vehicle or RV will be exempt from sales tax up to $2,000 of the agreed value of the trade-in. The $2,000 amount will increase $500 per year on January 1, 2015 and by $500 each successive January 1 for 25 years until the exemption reaches $14,000 (unless Section 105d of the Social Welfare Act is repealed). Leased motor vehicles or RVs will not qualify for this exemption.
As an example, on the sale of a $20,000 vehicle in 2014 with a $4,000 trade in, sales tax will be charged on $18,000 ($20,000 less the $2,000 exemption amount).
Dealers must file Form RD-108T Supplemental Vehicle Trade-In Sales Tax Credit Form with the RD-108 on any vehicle sales transaction with a sales tax trade-in credit.
Edward J. Castellani is an attorney and certified public accountant specializing in the representation of auto dealers. He may be contacted at 517-377-0845 or at email@example.com.