How to enter trade-ins

Ok, the question is two fold:

1. What does the user have to do to create an invoice where a trade-in allowance is given to the customer?
2. Since the trade in will be re-sold in the normal course of business the amount subject to sales tax is reduced by the trade-in allowance. How can the user record the correct sales tax on the invoice?

Since the belt is now off the table I will give everyone that is interested a tip:

The answer to both parts can be found in QuickBooks help.

Hmm, I went back to the original post and it did not define if it was an invoice or a sales receipt. One must wonder if it makes a difference or not.

A sales receipt is an invoice that is paid at the time the sale is made. The solution is the same for both sales receipts and invoices that are paid on account.

As I am in the UK I can only assume that the treatment of UK sales tax (VAT) is different to the federal sales taxes you have. Certainly the posts so far indicate that tax is only due on the difference in this case. We have a particular regime for second hand goods.

To correctly deal with this you must create a "trade in" bank account and a "trade in" item that deposits to that account.

Your trade in line goes on the invoice as a minus and the appropriate sales tax code. This would give a correct invoice with the correct sales tax.

You then "buy" your trade in into stock in the usual manner but paying from this special bank account - which will noramally show a zero balance. You would create a new stock item - either a general one for trade ins or a specific one if you needed to track this particular item (eg '66 Impala.) A cheque with the item shown at the bottom will do - but with sales tax set to a zero rate (you've already accounted for tax on the purchase and will account for tax on the sale when you sell it)

If you did not wish to record stock (sorry inventory) your trade in item could just point directly to Cost of Goods Sold.

As I say this works on my UK version - but I don't know how this fits in with US sales tax. Also bear in mind that our versions of QB are different (I've already got my copy of QB 2006 and there is no new database and still limited to 5 users - ho hum).

Mike Phipps

Yes, finally someone is on the right track. You have answered correctly the trade-in portion of the problem.

Here is where you go astray. The trade-in item that you set up would be of a "payment type" and does not have any effect on the sales tax calculation.

It would point to either a sales discount or sales account. Increasing cost of goods sold makes little sense.

Good job Mike. I'm pretty sure if there was sales tax in the UK you would have gotten that part correct also. You the man.

We don't have a federal sales tax in the USA. Each state has its own sales tax scheme. California, where I am, has at least 100 different rates based on geographic boundaries as well as specific industries. Unfortunately, taxes are the birthright of the Colonies.