Used Video Game Trade-In Credit Not Taxable in Louisiana

Monday, March 23rd, 2015

A video game controller.

The Louisiana Court of Appeals ruled that store credit for used video games constituted a trade-in value. The credit was not part of the sales price for later purchases.

A video game retailer purchased used video games from customers. The retailer's customers had the option of using the amount received from the retailer as store credit. If the customer chose the store credit option, the retailer gave the customer a card that could be used to apply the credit to future purchases.

The court determined that when the store credit was applied to later purchases, the credit was not part of the taxable "sales price" of the purchases. The definition of "sales price" excludes the value of any article traded in. Because the credit on the card could only be applied to purchases at the retailer's stores, the credit was considered a "trade-in," and the amount of credit used on any later purchase was not subject to tax.

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