Mich. Admin. Code R 205.15 — Trade-in deduction and core charges

Rule 15. (1) Except as provided in subrules (2) and (3) of this rule, no deduction
from the sales price of a retail sale is allowed for any credit given by the seller for a
trade-in taken in exchange or as partial payment for tangible personal property and the
tax applies to the full selling price.
Example: A customer purchases an LP tank filled with propane gas for the sales
price of $49.95. Tax is due on the sales price of $49.95. Months later, the customer
returns for more propane gas, trades in an empty LP tank, and receives an LP tank full
of propane gas. The customer is charged $24.95, and the seller credits $25.00 for the
empty LP tank traded in. No deduction is allowed for the empty LP tank taken in trade
on the transaction. Tax is due on the total amount of $49.95, $24.95 plus $25.00,
without a reduction for the trade-in amount.
(2) Credit given by a seller, except for rentals and leases, is not part of the sales
price and is not subject to tax if the agreed-upon value is separately stated on the invoice,
bill of sale, or similar document given to the purchaser, in the following circumstances:
(a) Credit for the agreed-upon value of a titled watercraft used as part payment of
the purchase price of a new titled watercraft or used titled watercraft purchased from a
watercraft dealer.
(b) Credit for the agreed-upon value of a motor vehicle used as part payment of the
purchase price of a new or used motor vehicle or new or used recreational vehicle
purchased from a dealer. This deduction does not apply to a recreational vehicle used as
part payment for a motor vehicle. This deduction is limited, as follows:
(i) Beginning January 1, 2019, the lesser of the following:
(A) $5,000.00. Beginning January 1, 2020, and each January 1 after that, this limit
is increased by $1,000.00.
(B) The agreed-upon value of the motor vehicle used as part payment.
(ii) Beginning January 1, 2029, the full agreed-upon value of the traded-in motor
vehicle is eligible for the deduction.
(iii) Beginning January 1, 2018, credit for the full agreed-upon value of a
recreational vehicle used as part payment for a new or used recreational vehicle
purchased from a dealer.
Courtesy of Michigan Administrative Rules
Example: A customer purchases a new motor vehicle on February 1, 2019 from a
dealer for $25,000.00. The dealer agrees to take the customer’s used motor vehicle in
on trade and agrees to credit the customer $10,000.00 for the traded in vehicle. The
customer pays the remaining $15,000.00 through a financing agreement. Only up to
$5,000.00 of the trade-in vehicle is eligible for the deduction, therefore, the taxable
sales price of the vehicle is $20,000.00.
(3) Beginning January 1, 2017, credit for the core charge attributable to a recycling
fee, deposit, or disposal fee for a motor vehicle or recreational vehicle part or battery is
deductible from the sales price if the recycling fee, deposit, or disposal fee is separately
stated on the invoice, bill of sale, or similar document given to the purchaser.
Example: A retailer sells a customer a car battery for $100.00. The invoice given
to the customer separately itemizes a $20.00 charge for a recycling fee for the battery.
The taxable sales price of the battery is $80.00.
(4) Tangible personal property acquired by the seller through a trade-in that is later
sold at retail is subject to sales tax on the full sales price.