Illinois Administrative Code › Title 86 - REVENUE › Part 130 - RETAILERS' OCCUPATION TAX › Subpart D - GROSS RECEIPTS › Section 130.425 - Traded-In Property

Current through Register Vol. 48, No. 28, July 12, 2024
a) "Gross
				receipts" means the "selling price" or "amount of sale".
"Selling
				price" or the "amount of sale" means the consideration for a sale valued in
				money, whether received in money or otherwise, including cash, credits,
				property other than as hereinafter provided, and services, but, prior to
				January 1, 2020 and beginning again on January 1, 2022, not including the value
				of or credit given for traded-in tangible personal property
when
the item that is traded-in is of like kind and character as that which
				is being sold; beginning January 1, 2020 and until January 1, 2022, "selling
				price" includes the portion of the value of, or credit given for, traded-in
				motor vehicles of the first division, as defined in Section 1-146 of the
				Illinois Vehicle Code, of like kind and character as that which is being sold
				that exceeds $10,000. "Selling price" shall be determined without any deduction
				on account of the cost of the property sold, the cost of materials used, labor
				or service cost or any other expense whatsoever. "Selling price" does not
				include charges that are added to prices by sellers on account of the seller's
				tax liability under the Retailers' Occupation Tax Act, or on account of the
				seller's duty to collect, from the purchaser, the tax that is imposed by the
				Use Tax Act, or, except as otherwise provided with respect to any cigarette tax
				imposed by a home rule unit, on account of the seller's tax liability under any
				local occupation tax administered by the Department, or, except as otherwise
				provided with respect to any cigarette tax imposed by a home rule unit, on
				account of the seller's duty to collect, from the purchasers, the tax that is
				imposed under any local use tax administered by the Department
.
				[35
				ILCS 120/1] Local occupation and use taxes
				administered by the Department include, but are not limited to, the Home Rule
				Municipal Retailers' Occupation Tax Act [65 ILCS 5/8-11 -1], the Non-Home Rule
				Municipal Retailers' Occupation Tax Act [65 ILCS 5/8-11 -1.3], the Home Rule
				County Retailers' Occupation Tax Act [55 ILCS
				5/5-1006], Section 4 of the Water Commission Act of
				1985 [70 ILCS 3720/4], Section
				5.01 of the Local Mass Transit District Act [70
				ILCS 3610/5.01]. Section 4.03 of the Regional
				Transportation Authority Act [70 ILCS
				3615/4.03], the Special County Retailers' Occupation
				Tax for Public Safety, Public Facilities, Mental Health, Substance Abuse, or
				Transportation Law [55 ILCS
				5/5-1006.5(a)], the County School Facility and
				Resources Occupation Tax Law [55 ILCS
				5/5-1006.7(a)], the County Cannabis Retailers'
				Occupation Tax Law [55 ILCS
				5/5-1006.8], the Municipal Cannabis Retailers'
				Occupation Tax Law [65 ILCS 5/8-11 -23], the County Motor Fuel Tax Law
				[55 ILCS 5/5-1035.1],
				and the Municipal Motor Fuel Tax Law [65 ILCS 5/8-11 -2.3].
b) The phrase "like kind and character"
				includes, but is not limited to, the trading of any kind of motor vehicle on
				the purchase of any kind of motor vehicle, or the trading of any kind of farm
				implement on the purchase of any kind of farm implement, while not including a
				kind of item which, if sold at retail by that retailer, would be exempt from
				Retailers' Occupation Tax and Use Tax as an isolated or occasional
				sale.
c) A motor vehicle traded to
				a farm implement dealer for a farm implement would not qualify for the
				exemption unless such farm implement dealer is also a motor vehicle dealer
				because the farm implement dealer's sale of the motor vehicle would be exempt
				as an isolated or occasional sale. A farm implement traded to a motor vehicle
				dealer for a motor vehicle would not qualify for the exemption unless such
				dealer is also a farm implement dealer because the motor vehicle dealer's sale
				of the farm implement would be an exempt isolated or occasional sale. A farm
				implement traded for a motor vehicle, or a motor vehicle traded for a farm
				implement, would qualify for the exemption if the seller is engaged in business
				both as a motor vehicle dealer and a farm implement dealer. Agricultural
				produce or animals traded for a motor vehicle or for a farm implement would not
				qualify for the exemption.
d) The
				real test is whether the retail sale of the traded-in tangible personal
				property by the person who accepts it in trade would be subject to Retailers'
				Occupation Tax, or whether such sale would be exempt as an isolated or
				occasional sale (see Section
				130.110). In the
				former event, the tangible personal property qualifies for the trade-in
				exemption. In the latter event, it does not.
e) The value of tangible personal property
				taken by a seller in trade as all or a part of the consideration for a sale,
				where the item that is traded-in is of like kind and character as that which is
				being sold, shall not be considered to be "gross receipts" subject to the
				Retailers' Occupation Tax and need not be included in the seller's return, or
				may be deducted in the return from gross receipts if included in gross receipts
				as reported in the return. The value of traded-in real estate or intangible
				personal property is not deductible from gross receipts in computing Retailers'
				Occupation Tax liability.
f) The
				Retailers' Occupation Tax applies to the business of selling tangible personal
				property at retail in this State whether such property is new or used and
				regardless of how the seller may have acquired such property (i.e., by way of
				purchase, as a trade-in or in some other manner).
g) No trade-in credit may be taken for
				amounts representing the proceeds due or paid under an insurance contract if
				title to missing, damaged or destroyed property is transferred to an insurer by
				operation of law or contract, i.e., the insurance claim value of property may
				not be used as a trade-in credit when an insured purchases tangible personal
				property to replace property which has been lost or destroyed.
h) No trade-in credit may be taken for that
				portion of the purchase price of a new automobile representing a settlement
				which the purchaser has obtained from an automobile manufacturer pursuant to
				the New Vehicle Buyer Protection Act [815 ILCS 380].
i) When tangible personal property is sold
				that is covered by a "core charge," the full retail selling price of such
				property, including the core charge, is subject to Retailers' Occupation Tax.
				The fact that a component of the gross receipts from the sale of the tangible
				personal property is labeled a "core charge" does not change the taxable nature
				of the transaction. A core charge is regarded as a predetermined trade-in
				value. Tax should be charged on the core charge, but a deduction may be taken
				for the traded-in tangible personal property actually received after the date
				of sale if books and records clearly relate the trade-in to the sales
				transaction. Such a situation would occur when the replacement property is
				purchased prior to the time the used property is returned. If, on the other
				hand, the used property is traded in at the time of purchase, tax is due on the
				purchase price, less the allowance for the trade-in.
j) Traded-in first division motor vehicles
				during the period beginning January 1, 2020 and until January 1, 2022.
Beginning January 1, 2020 and until January 1, 2022, the trade-in
				credit may not be taken for that portion of the value of, or credit given for,
				a traded-in motor vehicle of the first division, as defined in Section 1-146 of
				the Illinois Vehicle Code, of like kind and character as that which is being
				sold that exceeds $10,000
. (Section 1 of the Act) This means that,
				during the period beginning January 1, 2020 and until January 1, 2022, $10,000
				is the maximum credit a retailer may take on the return to reduce the taxable
				selling price of a motor vehicle when he or she accepts the trade-in of a first
				division motor vehicle in the transaction, regardless of the value of, or
				credit given for, the trade-in. This does not prohibit the retailer from
				reducing the price of the vehicle being sold by the value of, or credit given
				for, the traded-in motor vehicle. It only limits the credit the retailer may
				take on the return for that trade-in.
1)
				Definitions. For purposes of this subsection (j):
"Devices requiring a certificate of title under Section
				  3-101(d) of the Illinois Vehicle Code" means
all-terrain vehicles and
				  off-highway motorcycles purchased on or after January 1, 1998.
[625 ILCS
				  5/3-101(d)]
"Motor vehicle" means every vehicle that is
				  self-propelled and every vehicle that is propelled by electric power obtained
				  from overhead trolley wires, but not operated upon rails, except for vehicles
				  moved solely by human power, motorized wheelchairs, low-speed electric
				  bicycles, and low-speed gas bicycles. Motor vehicles are divided into two
				  divisions: first division and second division.
[625 ILCS
				  5/1-146]
"First division motor vehicle" means a motor vehicle
				  that is designed for the carrying of not more than 10 persons.
[625 ILCS
				  5/1-146]
"Second division motor vehicle"
				  means:
a motor vehicle designed for carrying more than 10
				  persons;
a motor vehicle designed or used for living
				  quarters;
a motor vehicle designed for pulling or carrying
				  freight, cargo, or implements of husbandry; and
a motor vehicle of the first division remodeled for
				  use and used as a motor vehicle of the second division.
[625 ILCS
				  5/1-146]
"Vehicle" means every device:
in, upon, or by which any person or property is or
				  may be transported or drawn upon a highway; or
requiring a certificate of title under Section
				  3-101(d) of the Illinois Vehicle Code.
However, "vehicle" does not include junk vehicles,
				  devices otherwise prescribed in the Illinois Vehicle Code, devices moved by
				  human power, devices used exclusively upon stationary rails or tracks, or
				  snowmobiles as defined in the Snowmobile Registration and Safety Act
[625 ILCS 40]
.
[625 ILCS
				  5/1-217]
2) Items That Are First Division Motor
				Vehicles. Beginning January 1, 2020 and until January 1, 2022, traded-in first
				division motor vehicles are subject to the $10,000 limit on the trade-in
				credit. First division motor vehicles generally consist of most standard
				passenger cars. This includes most sport utility vehicles (SUVs) that are
				enclosed and designed primarily for passengers, regardless of whether the SUV
				is registered as a passenger vehicle, registered as a Class B vehicle under
				Section 3-815 of the Illinois Vehicle Code, or registered in some other way. In
				addition, devices requiring a certificate of title, such as all-terrain
				vehicles (ATVs) and off-highway motorcycles are first division motor vehicles.
				To aid in the determination of whether a traded-in motor vehicle is a first
				division motor vehicle, the following is a non-exhaustive list of first
				division motor vehicles:
A) Motor vehicles
				designed for carrying not more than 10 persons. This category includes motor
				vehicles designed as passenger vehicles, but whose seats have been removed,
				such as a minivan with the seats removed. This is in contrast to a motor
				vehicle that is designed for pulling or carrying property, freight, or cargo,
				such as a panel van, which is a second division motor vehicle.
B) SUVs designed for carrying not more than
				10 persons.
C) Motorcycles, both
				on-road and off-road.
D)
				ATVs.
3) Items That Are
				Second Division Motor Vehicles. Second division motor vehicles that are traded
				in are not subject to the $10,000 limit on the trade-in credit. Second division
				motor vehicles generally include open-bed vehicles (such as pickup trucks) and
				enclosed vehicles designed to carry cargo (such as panel vans). To aid in the
				determination of whether a traded-in motor vehicle is a second division motor
				vehicle, the following is a non-exhaustive list of second division motor
				vehicles:
A) Motor vehicles designed for
				carrying more than 10 persons, including limousines, SUVs, transport vehicles,
				and any other passenger vehicle designed for carrying more than 10
				passengers.
B) Motor vehicles
				designed or used for living quarters, such as RVs (recreational
				vehicles).
C) Motor vehicles
				designed for pulling or carrying property, freight, or cargo. This category
				includes open-bed vehicles, including, but not limited to, pickup trucks (even
				if the bed has been covered by a top of any kind) and side by side vehicles,
				also known as UTVs (utility vehicles), ROVs (recreational off-highway
				vehicles), and MOHUVs (multi-purpose off-highway utility vehicles), if they
				have an open bed (even if the bed has been covered by a top of any kind) or are
				otherwise designed for carrying property, freight, or cargo. This category also
				includes enclosed vehicles typically used commercially, such as panel vans or
				cargo vans.
D) School buses,
				including vehicles of the first division used and registered as school
				buses.
E) Ambulances, medical
				carriers, and hearses.
4) Beginning January 1, 2020 and until
				January 1, 2022, sales to purchasers from non-reciprocal states are subject to
				the $10,000 trade-in credit limit. The $10,000 limit on the credit allowed for
				traded-in first division motor vehicles applies regardless of whether the
				purchaser is an Illinois resident, unless the purchaser can claim the
				non-resident purchaser exemption as a resident of a reciprocal state found
				under
				35
				ILCS 120/2-5(25). Under
				35
				ILCS 120/2-5 (25-5) residents of states other than
				Illinois may not claim the nonresident purchaser exemption on purchases of
				motor vehicles or trailers in Illinois that will be titled in a state that does
				not give Illinois residents a nonresident purchaser exemption on their
				purchases in that state of motor vehicles or trailers that will be titled in
				Illinois (i.e., the other state offers no reciprocal exemption to Illinois
				residents). These states are referred to as non-reciprocal states. The $10,000
				trade-in credit limit applies in sales to nonresident purchasers from
				nonreciprocal states. See ST-58, Reciprocal - Non-Reciprocal Vehicle Tax Rate
				Chart, to determine whether another state is non-reciprocal with Illinois.
				Note, however, that motor vehicles leased to nonresidents using drive-away
				permits or transferring out-of-state vehicle registration plates will be
				exempt, regardless of the purchaser's state of residence. Therefore, the
				trade-in credit limit does not impact these transactions.
5) Examples. The following examples
				illustrate the $10,000 limit on the trade-in credit allowed beginning January
				1, 2020 and until January 1, 2022.
EXAMPLE 1
A motor vehicle retailer sells a new car for $40,000 and
				  allows $30,000 for the trade-in of a sport utility vehicle that seats 8
				  passengers. Since a sport utility vehicle that seats 8 passengers is a first
				  division motor vehicle, the credit that the retailer may take on the return for
				  the traded-in sport utility vehicle is $10,000.
EXAMPLE 2
A motor vehicle retailer sells a new car for $40,000 and
				  allows $30,000 for the trade-in of a pickup truck. Since a pickup truck is a
				  second division motor vehicle, the credit that the retailer may take on the
				  return for the traded-in pickup truck is $30,000.
EXAMPLE 3
A motor vehicle retailer sells a new motorcycle for $30,000
				  and allows $20,000 for the trade-in of a motorcycle. Since a motorcycle is a
				  first division motor vehicle, the credit that the retailer may take on the
				  return for the traded-in motorcycle is $10,000.
EXAMPLE 4
A motor vehicle retailer sells a new limousine for $60,000
				  and allows $30,000 for the trade-in of a limousine that seats 10 passengers.
				  Since a limousine that seats 10 passengers or less is a first division motor
				  vehicle, the credit that the retailer may take on the return for the traded-in
				  limousine is $10,000.
EXAMPLE 5
A motor vehicle retailer sells a new limousine for $60,000
				  and allows $30,000 for the trade-in of a limousine that seats 11 passengers.
				  Since a limousine that seats 11 passengers or more is a second division motor
				  vehicle, the credit that the retailer may take on the return for the traded-in
				  limousine is $30,000.