The Illinois Department of Revenue permits a vehicle owner to trade in a vehicle and apply the sales tax trade-in credit on a purchase made up to 9 months after the trade in, provided the transaction is properly documented. To use an advance trade-in, a customer must sign an agreement describing the traded-in vehicle and agree to purchase another vehicle from the same dealer within 9 months. An advance trade-in credit cannot be transferred to another purchaser. If the customer does not purchase another vehicle from the dealer within 9 months, the credit expires. IADA Form 104 can help you ensure that the advance trade-in is properly documented. The Illinois Department of Revenue has published a helpful guide answering many motor vehicle sales tax questions titled ST-9 A Guide for Reporting Sales Using Form ST-556, Sales Tax Transaction Return, which includes additional details about advance trade-ins. Click here for a link to ST-9. What is an advance trade-in? An advance trade-in is a transaction in which a purchaser trades in an item to you prior to the actual purchase of an item and is given an advance trade-in credit to use on a future purchase - provided the purchaser by written contract agrees to purchase one or more items from you within nine months of the date the advance trade-in is established. The written contract needs only to specify the purchaser's obligation to purchase within a nine-month period, not the make, model, or price of the item to be purchased. How do I use an advance trade-in credit? You use an advance trade-in credit in the same way as a regular trade-in credit by subtracting the amount of the advance trade-in credit from the selling price of the item sold on Form ST‑556 in Section 6, Lines 1 and 2, and describing the trade-in in Section 4. You may issue the advance trade-in credit to the purchaser in the form of either cash or credit. If the purchaser does not use the advance trade-in credit toward the purchase of an item from you within the nine-month period, the advance trade-in credit expires. What documents am I required to keep for an advance trade-in? The documentation you are required to keep in support of an advance trade-in transaction includes the written contract specifying the obligation to purchase within nine months and the expiration date and amount of the advance trade-in credit, a bill of sale for the item traded in, and a copy of the filed Form ST-556 showing the sale of an item and use of the advance trade-in credit. Can a purchaser transfer advance trade-in credit to another purchaser? No. Advance trade-in credits are not transferable to another purchaser. They are not permitted when the purchaser of an item is not the owner of the trade-in. In other words, you may not use advance trade-in credits in conjunction with third-party trade-ins. May I combine "split" or "multiple" trade-in transactions with an advance trade-in? Yes. As with standard trade-in credit, you may split or combine advance trade-in credit as needed, provided that all of the items traded in and sold are recorded as a single transaction, the purchaser is contractually obligated to purchase any items from you within nine months, and all applicable Form ST‑556 returns are properly completed and filed. |
