Urgent Notice to all Auto and Equipment Dealers:

The Indiana Department of Revenue recently changed their guidance on the sales tax deduction attributable to the value of a trade in.  Before December 1, 2016 the fair market value of the trade in reduced the sale subject to Indiana sales tax.  Effective December 1, 2016 guidance now states that only the positive equity value of the trade in will reduce the taxable selling price.  This change by the department was not the result of a change in statute, but the departments change in position on the subject.

Somerset’s tax department is in constant communication with the Indiana Department of Revenue on this subject.  We have communicated to the IDR the ramifications and consequences of this change not being supported by tax regulations, the burden this places on the dealership to hurriedly alter the way they do business, and how poorly this change in governance was communicated to the public.

The Indiana Department of Revenue’s  response is that their team is working through details on the final bulletin issues.  In the interim, if any dealers are having issues, the department will allow for the dealers to continue with their current practice (i.e. following the current or the prior with regard to trade-ins up to the equity in the vehicle) until further notice.  A meeting with practitioners is being scheduled as quickly as possible.

Somerset’s tax team will attend the IDR’s meeting and immediately inform you of any progress or resolution accomplished.