How to show credit / trade-in

Using QB2000 I create internal and external invoices.

Internal I invoice for the full amount and I receive a bill for the trade in. (Make a new quick vendor with the same customer name but add the word SELL.) In a copy of my QBW file under the same invoice number I list the sales price and using the same item description with Quantity -1 list the trade received.

I mail out this "external" invoice and staple a copy of the other two documents with every of the three documents. Although that mailed out invoice will disappear with the copy of QBW it can easily be recreated from the internal ones or the hard copy on file.

Doing it this way has the advantage that you can look at the true cost of the trade-in for your inventory and your sales will not be understated.

As they worked with hard copies only I had no problems with Federal and Provincial tax audits but I would suggest you check with your own tax offices to see if there are any objections or guide lines.

Hmm. Wouldn't that make the customer liable for the sales tax on the full amount?

I'd prefer to treat the trade-in as a "discount" from the original selling price, thereby lowering the buyer's tax. Heck, he already paid sales tax on the original item...

Nevertheless, you're correct in recommending a consulatation with the taxing authority to find the fairest way of handling the transaction.

Not here, but that is why I suggested to check with the tax offices in ones own jurisdiction. Our GST is akin to but the HST in the Maritime Provinces is a true VAT. I buy something and pay the tax. I sell the goods and charge the tax. I remit the difference between charging and paying only; ergo, tax on the value added amount. This applies to all of my or the customers purchases or sales during the reporting period. This way it always only ends up at the difference.

Used to be that Federal tax was paid on the difference but Provincial Tax on the whole amount. Provincial Tax I only know the Ontario rules and, except for Universities or other educational institutions all my customers use the purchased items to incorporate in or alter goods for resale (metal working machinery in my case), which makes them tax exempt providing they sign an exemption certificate. They do not have to be a registered business to qualify for that PST exemption and it is not the sellers responsibility to police if the person is entitled to sign such a certificate.

A few years ago the feds charged GST on the difference if the was a trade but the Province charged PST on the selling price before discount. I used to love buying personal cars as I had made a Lotus spread sheet for my laptop where I could just plug in the Amount (+ extras), and the trade or the total less the trade and I would get the missing figure. That took the lead away from the salesman as you only had to change the trade or the total a little and they were hacking around on their calculators forever trying to come up with a figure. Best of course was when giving them the drive away amount because when they finally had come up with a figure they had forgotten to add in the Office preparation fee or the $ 10.00 for a transfer of the old or $

Yeah, in re-thinking my answer, I conclude that my mad-cow disease was acting up. The customer is paying the full price - and should be taxed on the full price - but part of his payment is in merchandise.