The Indiana Department of Revenue gave us all quite a scare by revising the “trade in deduction” guidance when computing Indiana sales tax liability. Essentially, the revised interpretation reduced the value of a trade by any lien or encumbrance when calculating sales tax. Under this interpretation, if a customer is “upside down” on the trade they receive no reduction on the sales tax calculation for their trade.

As you can imagine, this change negatively impacts auto, motorcycle, power sport and equipment dealers, as well as their customers to name just a few. The Indiana Department of Revenue published their instructions to be effective December 1, 2016. As a result of Somerset’s communication with the Indiana Department of Revenue Policy Division, the IDR is now retracting this change. The IDR has instructed vehicle and equipment dealers to calculate sales tax as they did prior to the guidance issued as of December 1st.

The Indiana Department of Revenue is working internally to update their instructions and expects to issue a revised Information Bulletin in February. Revisions will first be circulated among a group of internal DOR reviewers and practitioners, which includes Somerset.

Your Somerset Dealership Team will continue to advocate on your behalf and share updates as available. In the meantime, do not change your procedures but carry on business as usual. For questions, please contact one of our Dealership Team experts.