Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
490.0000 RETURNS, DEFECTS AND REPLACEMENTS—Regulation 1655
(d) DEFECTIVE MERCHANDISE
490.0750 Defective Trailer. A firm purchases a trailer in September 1992. The trailer was defective and after numerous attempts to fix the problem, the dealer agreed to replace it. A new trailer with a sales price of $18,105 was furnished. A credit of $9,400 for the "trade-in" was allowed. The manufacturer paid $8,705 on account of the defective condition of the first trailer. The firm paid $1935.55 which covered sales tax and registration fees.
The appropriate amount of sales tax due on the transaction is measured by the sales price ($18,105) less the amount credited by the manufacturer on account of the defective condition of the trailer ($8,705). The dealer should refund the excess tax reimbursement and file a claim for refund. 2/25/94.