Last Updated: 2/28/2025
The Trade-In feature offers customers more flexibility in bringing items to your shop. In places where trades are taxable, tax credits can help reduce the customer's tax burden on their newly purchased item. This article will help you navigate and understand how tax credits work on Trades and Layaways.
To learn more about the Trade-In feature, read this article, Trade-Ins and Exchanges.
Click the links below to learn more about each transaction. Use your browser's back button to return to the list.
- Trade-In Amount Is Higher Than or Equal To Down Payment Amount
- Trade-In Amount Is Less Than Down Payment Amount
Trade-in on Sales
Trading an item for a new one is the most common use of this function. When trades are taxable, they can lower the customer's out-of-pocket tax. Below, we will explain how the sales tax credit is calculated.
Example
- In the first example, the customer brings in a phone to trade. It has a Trade-In value of $100. He wants to trade for an item worth $729.
- The sales tax rate at this store is 7%.
- On the Transaction screen you can see that the Subtotal is minus the $100 Trade-in value.
- The tax will show on the Tender Screen below.
Here is a breakdown of the transaction:
- Trade-In amount = ($100.00)
- Sales total = $729.00
- Trade Tax Credit = $7.00
- Sales Tax = $51.03
- Total amount due for this transaction is $673.03. The trade-in value covered $100 of the Sales total, and the trade-in tax credit lowered the Sales Tax.
Sale Item and trade-in of equal value
- When the sale price and the trade-in value are of the same value, the total amount due for this transaction would be $0.00. The trade-in value covers the sales total, and the trade-in tax credit covered the sales tax.
Sale Item Priced Higher than Trade-In Value
- When the sale price exceeds the trade-in value, the trade value reduces the customer's amount due. Since the sale price is higher, the full tax credit on the trade is applied, appearing as a credit against the sales tax owed.
Sale Priced Item Lower Than Trade-In Value
- On a transaction when a trade-in is worth more than the sales item, the customer will be owed a refund.
- Since the sales price is lower than the trade-in value, the tax credit on the trade equals the tax on the sale. The maximum sales tax credit matches the tax due on the sold item. This negative sale will be treated as a Taxable Return on the End of Month report's Sales Activity section.
Sale Return
- When an item is returned that was sold through a trade in transaction, the return is very straight forward.
- An item valued at $300 is returned. The tax rate is 10%.
- The return is processed as normal and shows a refund amount of $330.00. $300.00 is the sales price of the item and $30.00 is the tax paid. (In this case the tax was paid via a trade-in tax credit.)
Trade-In on Layaways
Trade-In credits can also be applied toward the down payment of a layaway. During a layaway transaction, the tax is unseen. This will cause the trade-in tax credit to behave very differently from a trade-in tax credit on a sale.
Trade-In Amount Is Higher Than or Equal To Down Payment Amount
- If the trade-in value matches the layaway down payment, adjust the down payment to equal the trade-in value, resulting in a $0.00 transaction subtotal.
- Clicking next will show a Refund Detail window instead of the tender screen.
- This window processes a refund for the sales tax credit, calculated based on the down payment as a tax-included transaction.
- Bravo calculates tax for each layaway transaction, although it's officially collected only at the final payment.
- To ensure the customer leaves with no credit and nothing due, increase the layaway down payment.
- To determine the maximum tax credit for the trade, multiply the trade-in amount by the store's sales tax rate and adjust your down payment accordingly.
- Now when the layaway down payment is processed, no credit should be due back to the customer.
Trade-In Amount Is Less Than Down Payment Amount
- If the layaway down payment exceeds the trade-in amount, the full trade-in tax credit will be applied.
- The full trade-in tax credit is available to the customer, appearing as an additional credit on the sale to offset the layaway tax, lowering the customer's amount owed.
Layaway Cancellation
- If they received the trade-in tax credit, it is not refundable since the tax was never collected.
- This is different from the sale, where the tax credit was applied toward a tax that was due and collected.