Accountants, IRS, Tax people... solve an argument.

NYSpeed Automotive NYSpeed Off Topic
1

Just trying to figure who is right in this trade instance for NYS Tax purposes

Customer has item(s) that has a value that exceeds the value of the item they are looking to purchase.

Let’s call said item a watch and the item being purchased is a band for a watch.

Item Being Traded = $50 Value
Item Being Purchased = $19.99

Remaining credit will be used at a later date. Credit never expires.

Taxes are paid quarterly.

Should the remaining credit be calculated as:

(50-19.99)*1.0875 = 32.64

or

50 - (19.99*1.0875) = 28.26

or

50 - 19.99 = 30.01, tax is not calculated due to value of trade exceeding item to be purchased.

or

Other

GO!

2

the item type matters. is this a watch, a car, a house?

3

What is the timeframe for reporting your taxes & how long is the credit expected to be held (Or how long does the customer have to use it?

4

Well for 50$ I hope it’s not a house or car

5

Call it a watch being traded and being purchased a band for a watch.

---------- Post added at 01:32 PM ---------- Previous post was at 01:31 PM ----------

Credit never experies, taxes reported/paid quarterly.

6

my head hurts.

7

IMO I would do the second choice. Customer gets a credit of $28.26. (Essentially just replace the Watch with $50 cash, and treat it that way).

8

The value of the credit is 30.01. When they use it to buy something else, they pay tax on the item they purchase so they really can buy less than 30.01 worth of stuff with it or they have to cover the difference.

9

You are over thinking this. You report sales tax on SALES. It isn’t a balance sheet for accounting and is calculated for the price at time of purchase.

The item he gave you is worth $50 so you give him $50 credit. If he buys a $19.99 item, the total is $21.74 he must pay out of his credit. He then has $28.26 left over for credit and you reported the $1.75 sales tax for that item that was sold for $19.99. The item you took from him has no value to NY sales tax unless you resell it. If you decide to list it for $100, then when someone buys it you need to report your $100 item and the $8.75 in sales tax for that said item. The credit balance the person has means nothing. If they come buy something else at your store, then they will use that balance to pay the sales tax at time of purchase so if he buys another 19.99 watch band, he will pay 21.74 with his credit and you report the $1.75 sales tax on the quarter the sales was made.