When could a seller reduce the taxable sales price by the value of property accepted as a trade-in?

Plain-English summary

A seller could reduce the sales price subject to tax by a qualifying trade-in.

The traded property could be the same kind as the item sold—for example, an old computer system traded toward a new computer system. A different type of property could also qualify if the seller sold that type in its regular course of business.

But a business that sold only computers could not reduce the taxable price by accepting a used stereo, because the stereo was neither like the computer nor an item the business regularly sold.

Common questions

Could a computer trade-in reduce the taxable price of a computer sale? Yes.

Did the property always have to be identical? No. Different property could qualify if the seller regularly sold that type of item.

Could a computer-only seller offset a stereo trade-in? No.

Citations and references

• 34 Tex. Admin. Code Rule 3.302(g)(1) and (2) (Trade-ins)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9002L0980B05

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller February 2, 1990

Dear **:

Thank you for your recent letter dated January 18, 1990.

The amount of the sales price subject to sales and use tax may be
reduced by a trade-in provided that the item being traded is of
the same nature. For example, if you sold a computer system and
received an old computer system in return, then the value of the
old system could be used to reduce the amount subject to sales
tax. However, if you are in business of selling only computer
systems and in return receive a used stereo system as a trade-in,
you cannot use the value of the trade-in to reduce the amount
subject to tax.

Please note not only can the items be of the same nature to
reduce the amount subject to tax, but they can also be different
types if sold in the regular course of business. Enclosed is
Rule 3.302 Accounting Methods, Credit Sales, Bad Debts Deductions,
Repossessions, Interest on Sales Tax, Trade-ins. Please refer to
Subsections (g) (1) and (2Y.

This opinion is based on the facts presented. If there are
additional or different facts, the opinion may change.

If you have any questions, please contact Tax Correspondence or
you may write to me at the above address. You may call toll free
1-800-252-5555, or our regular number is 512/463-4600. My
extension is 3-4278.

Sincerely,
Onofre Guerra
Tax Correspondence