This article explains the tax setting that limits the sales tax credit for trade-ins so it never exceeds the sales tax payable on the unit being purchased. Enabling this setting prevents a scenario where a trade-in credit creates a net tax benefit for the customer.
Example Scenario
To understand when this setting matters, consider the following example:
Mr. Smith is buying a new unit. The sales tax payable on that unit is $250.
Mr. Smith is trading in a unit. The sales tax credit on the trade-in is $275.
Without this setting enabled, the trade-in tax credit ($275) exceeds the sales tax on the new purchase ($250) by $25 — which the dealership may not be permitted to allow.
Enabling the Trade tax credit cannot exceed unit tax setting caps the trade-in credit at the tax amount payable on the new unit, preventing that overage.
How to Enable Trade In Tax Credit Cannot Exceed Unit Tax
1. From the Blackpurl header, click Tools, then select Tax from the dropdown.
2. Go to the Settings tab, then navigate to General Settings.
3. Locate the Trade tax credit cannot exceed unit tax option.
4. When the toggle is disabled, there is no limit on the sales tax credit calculated for trade-ins.
5. Move the toggle to enable the setting. The sales tax credit for trade-ins will now be capped at the sales tax amount for the new unit being sold.
6. Scroll down and click Apply settings to save your change.
Important Note
This setting is not available to dealerships using Tax Included Pricing. If your dealership is based in Australia or New Zealand and uses tax-inclusive pricing, this feature will not appear in your settings.